9. The Nominal Price of a gallon of juice is $0.25 (in Year 1978) and $1.35 (in Year 2009). The CPI is56.9 (in Year 1976) and 212.7 (in Year 2009). Measured in terms of the general level of prices in 2009,derive the real price of a gallon of juice for the years 1978. (2.d.p.) [Remark]

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Answered: 9. The Nominal Price of a gallon of…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

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Two countries, Country N in North America and Country S in South America, have the same CPI basket. Year 2000 is the CPI base year for both countries. In that year, the cost of CPI basket in Country N is $N100, and in country S is $s1000, where $N and $s are their respective currencies. Twenty years later, in 2020, the CPI in Country N rose to 240, and in Country S to 360. a) In the ideal world in which the purchasing power parity (PPP) holds true, what should be the nominal exchange between $s and $N in Year 2000 and in Year 2020. Show calculations and explain the change in nominal exchange rate. b) Suppose in reality, the nominal exchange rage between the two currencies is 18 $s per $N in Year 2020. First, explain why the nominal exchange rate differs from your calculation above. Second, calculate the real exchange rate between the two countries, and explain the meaning of your calculated result. c) During Year 2021, the growth of the real GDP in the two countries are, 0% in country…
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Period 1 Period 2 (base year) Period 3 Price Level Output Population 6 3 2 1 2 4 9 4 7 Use the above information to calculate the percent change in CPI between period 1 and 2. Express your answer as a decimal (rounded to the nearest thousandth).
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9. The Nominal Price of a gallon of juice is $0.25 (in Year 1978) and $1.35 (in Year 2009). The CPI is 56.9 (in Year 1976) and 212.7 (in Year 2009). Measured in terms of the general level of prices in 2009, derive the real price of a gallon of juice for the years 1978. (2.d.p.) [Remark]