C. What is the CPI in each year if the base year is 2019? Assume all four items have the same weight in the CPI basket equal to one unit each d. Using the CPI as the price index, what is the inflation rate between 2019 and 2020? And between 2020-2021? e. Without any calculation, would using the GDP deflator instead of CPI in (d) result in a higher or lower inflation rate? Explain your answer. f. What is the GDP deflator, how is it measured, and why is it considered a price index if it only includes GDP in both its numerator and denominator?

C. What is the CPI in each year if the base year is 2019? Assume all four items have the same weight in the CPI basket equal to one unit each d. Using the CPI as the price index, what is the inflation rate between 2019 and 2020? And between 2020-2021? e. Without any calculation, would using the GDP deflator instead of CPI in (d) result in a higher or lower inflation rate? Explain your answer. f. What is the GDP deflator, how is it measured, and why is it considered a price index if it only includes GDP in both its numerator and denominator?

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

question C,D,E,F

3. In the country below, only four items are produced, and all of the four are part of the CPI basket.
C.
a. What is the nominal GDP growth rate between 2019-2020, and between 2020-2021?
b. Given only the information you have, would real GDP growth be positive or negative between
2020 and 2021. Explain your answer.
What is the CPI in each year if the base year is 2019? Assume all four items have the same weight
in the CPI basket equal to one unit each
d. Using the CPI as the price index, what is the inflation rate between 2019 and 2020? And between
2020-2021?
e.
2019
2020
2021
Quantity Price Quantity | Price | Quantity | Price
10
$20
15
$25
14
$22
$1
120
$3
110
$2
$5
120
$8
110
$7
$40
10
$50
10
$45
f.
Items
Webcams
Surgical masks
100
Disinfectant wipes 100
Dumbbells
10
Without any calculation, would using the GDP deflator instead of CPI in (d) result in a higher or
lower inflation rate? Explain your answer.
What is the GDP deflator, how is it measured, and why is it considered a price index if it only
includes GDP in both its numerator and denominator?

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