karaoke machine karaoke machine CDs CDs year quantity Price Quantity Price 2013 20 $50 100 $15 2014 30 $90 150 $20
a. Calculate CPI and compute the inflation rate of CPI. Use 2013 as the base year, and fix the basket at 1 karaoke machines and 3 CDs.
b. Calculate GDP deflator and compute the inflation rate using GDP deflator. Also use 2013 as the base year.
c. Is the inflation rate in 2014 the same using the two methods? Explain why or why not.
| karaoke machine | karaoke machine | CDs | CDs | |
|---|---|---|---|---|
| year | quantity | Price | Quantity | Price |
| 2013 | 20 | $50 | 100 | $15 |
| 2014 | 30 | $90 | 150 | $20 |
a. Calculate CPI and compute the inflation rate of CPI. Use 2013 as the base year, and fix the basket at 1 karaoke machines and 3 CDs.
b. Calculate GDP deflator and compute the inflation rate using GDP deflator. Also use 2013 as the base year.
c. Is the inflation rate in 2014 the same using the two methods? Explain why or why not.
Related textbook solutions
Related questions
|
YEAR |
P of Hot Dogs |
Q of Hot Dogs |
P of Hamburgers |
Q of Hamburgers |
| 2011 | $1 | 100 | $2 | 50 |
| 2012 (Base Year) | $2 | 150 | $3 | 100 |
| 2013 | $3 | 200 | $4 | 150 |
a. Calculate the CPI for 2011 and 2012. Using the CPI, calculate the rate of inflation between 2011 and 2012.
b. Calculate the GDP deflator for 2012 and 2013. Using the GDP deflator, calculate the rate of inflation between 2012 and 2013.
c. Recalculate the inflation rate between 2012 and 2013 using the CPI instead of the GDP deflator. In general, would the two methods yield the same inflation rate? Why?
1.Consider an economy in which only food, clothing, and computers are produced. The established market basket is the following: 300 food, 40 clothing, 1 computer.
|
Quantities |
Prices |
|||||
|
Food |
Clothing |
Computers |
Food |
Clothing |
Computers |
|
|
5000 |
600 |
50 |
$4 |
$20 |
$600 |
|
|
5500 |
700 |
75 |
$5 |
$22 |
$500 |
|
Year
2013
2014
Using 2014 as the base year, calculate:
a)The nominal GDP in 2013 and 2014, as well as the nominal GDP growth rate.
b)The real GDP in 2013 and 2014, as well as the real GDP growth rate.
c)The GDP deflator in 2013 and 2014, as well as the GDP deflator inflation rate.
d)Calculate the CPI in 2013 and 2014, as well as the CPI inflation rate.
|
Base Year (2006) 2013 |
|||
|
Product |
Quantity |
Price |
Price |
|
Cokes |
100 |
$0.50 |
$0.75 |
|
Hamburgers |
200 |
2.00 |
2.50 |
|
CDs |
10 |
20.00 |
21.00 |
1) Refer to the table above. Assume the market basket for the consumer price index has three products: Cokes, hamburgers, and CDs.
The consumer price index for 2013 equals ______.
|
Product |
Quantity |
Base Year Price (2001) |
Price (2012) |
Price (2013) |
|
Burritos |
10 |
$1.00 |
$1.50 |
$1.75 |
|
Flashlights |
15 |
5.00 |
7.00 |
6.75 |
|
Golf balls |
8 |
2.00 |
3.00 |
3.50 |
2) Refer to the table above. Consider a simple economy that produces only three products: burritos, flashlights, and golf balls. Use the information in the table to calculate the inflation rate for 2013 (vs. 2012), as measured by the consumer price index.
|
Year |
Nominal Average Hourly Earnings |
CPI |
|
2011 |
$10 |
100 |
|
2012 |
10 |
105 |
|
2013 |
12 |
110 |
3) Refer to the table above. Real average hourly earnings were equal to ________ in 2012.
4) Looking at the table above, real average hourly earnings between 2012 and 2013 changed by ______%.
5) Matt's real wage in 2014 is $26.80. If the price level is 104, what is Matt's nominal wage?
