Answered: Consider the following data on Prices…

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

Consider the following data on Prices and Quantities of T-Shirts and Pajamas.

1. Calculate the total value of goods and services at current prices in this economy each
year?
2. Calculate the total value of goods and services at constant prices in this economy each
year? (Note: GDP deflator for 2015 is 100)
3. What is the growth rate of real GDP between 2016 and 2017?
4. What was the growth rate of nominal GDP between 2016 and 2017?
5. Was the growth rate of real GDP higher or lower than the growth rate of nominal
GDP? Explain.
6. Using 2015 as the base year, calculate the CPI for each year.
7. Calculate the inflation rate for 2015, 2016 and 2017.

Year
2015
2016
2017
Price of
T-Shirts
$10
12
14
Quantity of T-
Shirts
120
300
275
Price of
Pajamas
$12
15
18
Quantity of
Pajamas
200
200
180

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Follow-up Question

Please assist with the below

4. What was the growth rate of nominal GDP
between 2016 and 2017?
5. Was the growth rate of real GDP higher or lower
than the growth rate of nominal
GDP? Explain.
6. Using 2015 as the base year, calculate the CPI for
each year.
7. Calculate the inflation rate for 2015, 2016 and
2017.
Year
2015
2016
2017
Price of
T-Shirts
$10
12
14
Quantity of T-
Shirts
120
300
275
Price of
Pajamas
$12
15
18
Quantity of
Pajamas
200
200
180

Solution

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Follow-up Question

i.What was the growth rate of nominal GDP between 2016 and 2017?

ii. Was the growth rate of real GDP higher or lower than the growth rate of nominal GDP? Explain.
iii.Using 2015 as the base year, calculate the CPI for each year.

iv. Calculate the inflation rate for 2015, 2016 and 2017.

Solution

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Follow-up Question

Consider the following data on Prices and Quantities of T-Shirts and Pyjamas.
1. Using 2015 as the base year, calculate the CPI for each year.
2015
1. Calculate the inflation rate for 2015, 2016 and 2017.
2015

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