Question

The Central Statistical Office reported the following total manufacturing shipments for the 3 years from 1997 through 1999. Year Manufacturing Shipments (K’ billions) 1997 3929 1998 4052 1999 4260 (a) The CPI for 1997 – 1999 is given in table below. Use this information to deflate the manufacturing shipments series and comment on the pattern of manufacturers’ shipments in terms of constant kwachas. HOURLY WAGES OF MANUFACTURING WORKERS AND CONSUMER PRICE INDEX: 1996 – 2000 Year Hourly Wage (K) CPI (1982 – 1984 Base) 1996 12.77 156.9 1997 13.11 160.5 1998 13.46 163.0 1999 13.93 166.6 2000 14.36 172.6 2 (b) The following Product Price Indexes (finished consumer goods) are for 1997 through 1999, with 1982 as the base year. Use the PPI to deflate the series. Year Manufacturing Shipments (K billions) 1997 131.8 1998 130.7 1999 133.0 (c) Do you feel that the CPI or the PPI is more appropriate to use as a deflator for manufacturing shipments?

Answer 1

Answer:

By using given data,

(A)

The formula to defalte series =( Nominal value) / (Price index of respective year)

Year	Manufacturing shipments (K, billions)	PI	Deflate manufacturing shipments (K, billions)
1997	3929	1.605	2448
1998	4052	1.63	2486
1999	4260	1.666	2557