1. What is a market-clearing model? When is it appropriate to assume that market clear? 2. Use the model of supply and demand to explain how fall in the price of frozen yogurt would affect the price of ice cream and the quantity of ice cream sold. In your explanation, identify the exogenous and endogenous variables. 3. Consider an economy that produces and consumes hot dogs and hamburgers. In the following table are data for two different years. Goods Hot dogs Hamburgers Quantity (2010) 200 200 Price (2010) $2 $3 Quantity (2020) 250 250 Price (2020) $4 $4

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1. What is a market-clearing model? When is it appropriate to assume that market clear?
2. Use the model of supply and demand to explain how fall in the price of frozen yogurt
would affect the price of ice cream and the quantity of ice cream sold. In your
explanation, identify the exogenous and endogenous variables.
3. Consider an economy that produces and consumes hot dogs and hamburgers. In the
following table are data for two different years.
Goods
Hot dogs
Hamburgers
Quantity (2010)
200
200
Price (2010)
$2
$3
Quantity (2020)
250
250
Price (2020)
$4
$4
Using 2010 data as the base year
Compute the following statistics for each year.
Nominal GDP, Real GDP, GDP Deflator, Inflation rate using GDP deflator, CPI, Inflation rate
using CPI. (Hint: i) to calculate CPI use base year fixed quantity Hot dogs 200 and Hamburgers
200, ii) To calculate inflation rate, use percentage change in price level between two years.)
Transcribed Image Text:1. What is a market-clearing model? When is it appropriate to assume that market clear? 2. Use the model of supply and demand to explain how fall in the price of frozen yogurt would affect the price of ice cream and the quantity of ice cream sold. In your explanation, identify the exogenous and endogenous variables. 3. Consider an economy that produces and consumes hot dogs and hamburgers. In the following table are data for two different years. Goods Hot dogs Hamburgers Quantity (2010) 200 200 Price (2010) $2 $3 Quantity (2020) 250 250 Price (2020) $4 $4 Using 2010 data as the base year Compute the following statistics for each year. Nominal GDP, Real GDP, GDP Deflator, Inflation rate using GDP deflator, CPI, Inflation rate using CPI. (Hint: i) to calculate CPI use base year fixed quantity Hot dogs 200 and Hamburgers 200, ii) To calculate inflation rate, use percentage change in price level between two years.)
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