2. Consider an economy that produces only two types of fruits: mangos and bananas. The production and price for the base year (a few years ago) and the current year are as follows: Fruit Mango Banana Base Year Quantity 10 bags 22 bags Price $4 per bag $1 per bag Current Year Quantity 12 bags 24 bags Price $5 per bag $1.5 per bag a. Compute nominal GDP in the current year and in the base year. What is the percentage increase since the base year? b. Compute real GDP in the current year and in the base year. By what percentage does real GDP increase from the base year to the current year? c. Assume that the expenditure base to compute the CPI is base-year quantities. Calculate the CPI (Price Index) in both years and the inflation rate using the CPI.

2. Consider an economy that produces only two types of fruits: mangos and bananas. The production and price for the base year (a few years ago) and the current year are as follows: Fruit Mango Banana Base Year Quantity 10 bags 22 bags Price $4 per bag $1 per bag Current Year Quantity 12 bags 24 bags Price $5 per bag $1.5 per bag a. Compute nominal GDP in the current year and in the base year. What is the percentage increase since the base year? b. Compute real GDP in the current year and in the base year. By what percentage does real GDP increase from the base year to the current year? c. Assume that the expenditure base to compute the CPI is base-year quantities. Calculate the CPI (Price Index) in both years and the inflation rate using the CPI.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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