Given that the CPI for 2016 is 100, (a)Compute the CPI inflation rates for the years 2017 and 2018. (b)(i) Determine the percentage change in GDP deflator for 2016-2017 and 2017-2018. (ii) Compare your results in (i) above with your answers in (a) and justify. [ (c)Explain three problems associated with using CPI to measure cost of living.

Given that the CPI for 2016 is 100, (a)Compute the CPI inflation rates for the years 2017 and 2018. (b)(i) Determine the percentage change in GDP deflator for 2016-2017 and 2017-2018. (ii) Compare your results in (i) above with your answers in (a) and justify. [ (c)Explain three problems associated with using CPI to measure cost of living.

Economics Today and Tomorrow, Student Edition

1st Edition

ISBN:9780078747663

Author:McGraw-Hill

Publisher:McGraw-Hill

Chapter5: Buying The Necessities

Section5.2: Cloting Choices

Problem 1R

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Question

Given that the CPI for 2016 is 100,

(a)Compute the CPI inflation rates for the years 2017 and 2018.

(b)(i) Determine the percentage change in GDP deflator for 2016-2017 and 2017-2018.

(ii) Compare your results in (i) above with your answers in (a) and justify. [

(c)Explain three problems associated with using CPI to measure cost of living.

(d)State any two logical information you can infer about the hypothetical economy described above.

(e)The government in 2018 announced and implemented a 10 percent increase in the nominal salary of an average public servant from Gh¢500 in 2017. Does the salary of an average public servant have more purchasing power in 2017 or 2018?

(f)Briefly describe the concept of ‘rebasing’. Explain how rebasing affects the income and cost of living estimates of a country.

Price (Gh¢)
Quantity
2016
10
200
2017
12
400
2018
30
450

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