6. Consider the economy described in Problem 4. a. Construct rcal GDP for ycars 2005 and 2006 by using the average price of each good over the two years. b. By what percentage does real GDP change from 2005 to 2006? C. What is the GDP deflator in 2005 and 2006? Using the GDP deflator, what is the rate of inflation from 2005 to 2006? d. Is this an attractive solution to the problems pointed out in Problems 4 and 5 (i.e., two different growth rates and two different inflation rates, depending on which set of prices is used)? (The answer is yes and is the basis for the con- struction of chained-type deflators. See the appendix to

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6. Consider the economy described in Problem 4.
a. Construct rcal GDP for ycars 2005 and 2006 by using the
average price of each good over the two years.
b. Bywhat percentage does real GDP change from 2005 to 2006?
C. What is the GDP deflator in 2005 and 2006? Using the GDP
deflator, what is the rate of inflation from 2005 to 2006?
d. Is this an attractive solution to the problems pointed out in
Problems 4 and 5 (i.e., two different growth rates and two
different inflation rates, depending on which set of prices
is used)? (The answer is yes and is the basis for the con-
struction of chained-type deflators. See the appendix to
this chapter for more discussion.)
Transcribed Image Text:6. Consider the economy described in Problem 4. a. Construct rcal GDP for ycars 2005 and 2006 by using the average price of each good over the two years. b. Bywhat percentage does real GDP change from 2005 to 2006? C. What is the GDP deflator in 2005 and 2006? Using the GDP deflator, what is the rate of inflation from 2005 to 2006? d. Is this an attractive solution to the problems pointed out in Problems 4 and 5 (i.e., two different growth rates and two different inflation rates, depending on which set of prices is used)? (The answer is yes and is the basis for the con- struction of chained-type deflators. See the appendix to this chapter for more discussion.)
4. An economy produces three goods: cars, computers, and
oranges. Quantities and prices per unit for years 2005 and 2006
are as follows:
2005
2006
Quantity Price
Quantity
Price
Cars
10
$2000
12
$3000
Computers
4
$1000
6
$500
Oranges
1000
$1
1000
$1
Transcribed Image Text:4. An economy produces three goods: cars, computers, and oranges. Quantities and prices per unit for years 2005 and 2006 are as follows: 2005 2006 Quantity Price Quantity Price Cars 10 $2000 12 $3000 Computers 4 $1000 6 $500 Oranges 1000 $1 1000 $1
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