Assume an economy in which only broccoli and cauliflower are produced. In year 1, 500 million pounds of broccoli are produced and consumed and its price is $0.50 per pound, while 300 million pounds of cauliflower are produced and consumed and its price is $0.80 per pound. In year 2, 400 million pounds of broccoli are produced and consumed and its price is $0.60 per pound, while 350 million pounds of cauliflower are produced and consumed and its price is $0.85 per pound. (a) Using year 1 as the base year, calculate the GDP price deflator in years 1 and 2, and calculate the rate of inflation between years 1 and 2 from the GDP price deflator. (b) Using year 1 as the base year, calculate the CPI in years 1 and 2, and calculate the CPI rate of inflation.

Assume an economy in which only broccoli and cauliflower are produced. In year 1, 500 million pounds of broccoli are produced and consumed and its price is $0.50 per pound, while 300 million pounds of cauliflower are produced and consumed and its price is $0.80 per pound. In year 2, 400 million pounds of broccoli are produced and consumed and its price is $0.60 per pound, while 350 million pounds of cauliflower are produced and consumed and its price is $0.85 per pound. (a) Using year 1 as the base year, calculate the GDP price deflator in years 1 and 2, and calculate the rate of inflation between years 1 and 2 from the GDP price deflator. (b) Using year 1 as the base year, calculate the CPI in years 1 and 2, and calculate the CPI rate of inflation.

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter7: Macroeconomic Measurements, Part Ii: Gdp And Real Gdp

Section: Chapter Questions

Problem 4WNG

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Assume an economy in which only broccoli and cauliflower are produced. In year 1, 600 million kilograms of broccoli are produced and consumed and its price is $0.70 per kilogram, while 750 million kilograms of cauliflower are produced and consumed and its price is $0.90 per kilogram. In year 2, 650 million kilograms of broccoli are produced and consumed and its price is $0.75 per kilogram, while 700 million kilograms of cauliflower are produced and its price is $1.10 per kilogram. a. Using year 1 as the base year, the GDP price deflator in year 1 is and the GDP price deflator in year 2 is (Round your responses to two decimal places as needed.) Based on these results for the GDP price deflator, the rate of inflation between years 1 and 2 is %. (Round your response to two decimal places as needed.) b. Using year 1 as the base year, the CPI in year 1 is and the CPI in year 2 is (Round your responses to two decimal places as needed.) Based on these results for CPI, the CPI rate of…
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