1. Consider an economy that produces and consumes bread and cars. The data for two different years are as follows: Year 2000 Year 2010 Goods Quantity Price Quantity Price Cars 100 $ 50,000 120 $ 60,000 Bread 500,000 $ 10 400,000 $ 20 a) Use the year 2000 as the base year, compute the Nominal GDP for each year (both 2000 and 2010). b) Use the year 2000 as the base year, compute the Real GDP for each year (both 2000 and 2010) c) Compute the implicit price deflator in year 2010 and use it to explain how the price level has changed from year 2000 to 2010. (Note: implicit price deflator = GDP Deflator).
1. Consider an economy that produces and consumes bread and cars. The data for two different
years are as follows:
Year 2000 Year 2010
Goods Quantity
Cars 100 $ 50,000 120 $ 60,000
Bread 500,000 $ 10 400,000 $ 20
a) Use the year 2000 as the base year, compute the Nominal
2010).
b) Use the year 2000 as the base year, compute the Real GDP for each year (both 2000 and
2010)
c) Compute the implicit price deflator in year 2010 and use it to explain how the price level has
changed from year 2000 to 2010. (Note: implicit price deflator = GDP Deflator).
2. Consider a Cobb-Douglas production function with three inputs. K is capital (the number of
machines), L is labor (the number of workers), and H is human capital (the number of college
degrees among the workers) . The production function is
According to the question, it is given that :
- An economy that produces and consumes bread and cars.
Year 2000 Year 2010 Goods Quantity Price Quantity Price Cars 100 50,000 120 60,000 Bread 500,000 10 400,000 20
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