Question

#19 #20 #21

Use Me Jollowing information to answer the next several questions. Table 6.3 The following table lists the basket of goods in the Vegetarian Price Index (Assume 1993 is the base year.) Quantity 1993 Price 1994 Price 1995 Price Apples 10 $1.00 $1.50 $2.00 Cabbages 5 $2.00 $3.00 $2.50 Oranges 5 $2.00 $2.00 3.00 10 X 1.50 5 * 5.00 5 x 2.00 16) Using the information in Table 6.3, the Vegetarian Price Index for 1994 is: 16) A) 133. B) 100. C) 48. D) 158 D 17) Using the information in Table 6.3, the inflation rate from 1994 to 1995 is about: 17) A) 142% B) 42% C) 58% (D) 19% 18) Suppose that a price index in a country was 200 in 1998 and 210 in 1999. The inflation rate between those two years was: 18) A) 5% B) 4.76% C) 2.5%. D) 10%. 19) Suppose that in 1995 the chain-type price index for GDP in Costa Rica is 150 and the chain type price index in El Salvador is 120. In 1996 the price index in Costa Rica is 200 and the price index in El Salvador is 140. You could conclude that: 19) A) Costa Rica is a more expensive place to live than El Salvador. B) El Salvador is a more expensive place to live than Costa Rica C) Costa Rica's rate of inflation is higher than El Salvador's. D) El Salvador's rate of inflation is higher than Costa Rica's. TRUE FALSE, Write T ir the statement is true and 'F' If the statement is false. 20) Inflation must be high in Los Angeles because it is very expensive to live there. 20) MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question 21) Suppose that real GDP starts at 100 and grows at a rate of 6% a year for two years. In the third year real GDP would be: 21) A) 136. B) 106 C) 112.36. D) cannot be determined from the information given 22) Using the rule of 70, if the GDP per capita growth rate in the United States is 2.3%, standards of living double every: 22) A) 29 years. B) 70 years. C) 3.04 years D) 30.43 years. 23) Suppose the annual growth rate of GDP in Japan is 4%. In 35 years, GDP in Japan will double: 23) A) 2 times. B) 10 times.) 17.5 times. D) 3.5 times.

Answer 1

19.

Correct option: (C)

Reason: Inflation is calculated as a percentage change of CPI

Costa Rica inflation = (200-150)/150 = 0.3333 or 33.33%

El Salvador inflation = (140-120)/120 = 0.1666 or 16.67%

Thus, inflation in Costa Rica is higher than E Salvador

20.

True

Reason: Higher inflation means more expensive

21.

GDP = 100(1+0.06)² = 112.36

Thus, correct option: (C)