Consider an economy that produces 4 goods. Unless otherwise stated, 2017 is the base year. Quantity PriceProduct2017201820172018A57$30$40B64$20$40C812$15$20D35$100$110 Calculate nominal and real GDP for 2017 and 2018. What is the GDP deflator in 2017 and 2018? What is the corresponding annual growth rate of the economy and the annual inflation rate?Calculate the CPI for 2017 and 2018 (Hint: calculate the cost of the basket), as well as the annual CPI inflation rate. Why is GDP deflator inflation rate lower?

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Answered: Consider an economy that produces 4…

Macroeconomics: Principles and Policy (MindTap Course List)

13th Edition

ISBN:9781305280601

Author:William J. Baumol, Alan S. Blinder

Publisher:William J. Baumol, Alan S. Blinder

Chapter6: How Statisticians Measure Inflation

Section6.A: How Statisticians Measure Inflation

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Consider an economy that produces 4 goods. Unless otherwise stated, 2017 is the base year.

	Quantity		Price
Product	2017	2018	2017	2018
A	5	7	$30	$40
B	6	4	$20	$40
C	8	12	$15	$20
D	3	5	$100	$110

Calculate nominal and real GDP for 2017 and 2018. What is the GDP deflator in 2017 and 2018? What is the corresponding annual growth rate of the economy and the annual inflation rate?
Calculate the CPI for 2017 and 2018 (Hint: calculate the cost of the basket), as well as the annual CPI inflation rate. Why is GDP deflator inflation rate lower?

Definition Definition Increase in the amount of goods and services produced by a country in a given period of time compared to an earlier period. Economic growth is generally coupled with a rise in national income or the purchasing power of individuals. It is often measured in terms of the increase in a country's gross domestic product (GDP), or the overall monetary value of all the complete or final services and goods that a country can produce within its domestic boundaries in a specific period.

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