In year 1 and year 2, there are two products produced in a given economy: computers and bread. Suppose that there are no intermediate goods. In year 1, 20 computers are produced and sold at $1600 each, and in year 2, 28 computers are produced and sold at $2880 each. In year 1, 20,000 loaves of bread are sold for $4 each, and in year 2, 26,000 loaves of bread are sold for $4.40 each. a. Nominal GDP in year 1 is $ and nominal GDP in year 2 is $ (Round your responses to the nearest integer as needed.) b. Calculate real GDP in each year and the percentage increase in real GDP from year 1 to year 2 by using year 1 as the base year. Next, do the same calculations by using the chain-weighting method. Using year 1 as the base year, real GDP in year 1 is $, real GDP in year 2 is $ , and the percentage increase in real GDP from year 1 to year 2 is %. (Round responses for real GDP to the nearest integer as needed, and round your response for the percentage increase to three decimal places as needed.) Using the chain-weighting method, real GDP (in year 1 dollars) in year 1 is $. real GDP in year 2 (in year 1 dollars) is $, and the percentage increase in real GDP from year 1 to year 2 is %. (Round responses for rea GDP to the nearest integer as needed, and round your response for the percentage increase to three decimal places as needed.) c. Calculate the implicit GDP price deflator and the percentage inflation rate from year 1 to year 2 by using year 1 as the base year. Next, do the same calculations by using the chain-weighting method. Using year 1 as the base year, the implicit GDP price deflator in year 1 is, and the implicit GDP price deflator in year 2 is. (Round your responses to two decimal places as needed.) Based on these results for the implicit GDP price deflator, the rate of inflation between years 1 and 2 is %. (Round your response to two decimal places as needed.) Using the chain-weighting method, the implicit GDP price deflator (based on values in year 1 dollars) in year 1 is , and the implicit GDP price deflator (based on values in year 1 dollars) in year 2 is. (Round your responses to two decimal places as needed.) Based on these results for the implicit GDP price deflator, the rate of inflation between years 1 and 2 is %. (Round your response to two decimal places as needed.) d. Suppose that computers in year 2 are twice as productive as computers in year 1. How does this change your calculations in parts (a)-(c)? Explain any differences. A reasonable way to account for the fact that computers in year 2 are twice as productive as computers in year 1 in the calculations in parts (a)-(c) would be to define a "computer" as a "year 1 computer," which would entail

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In year 1 and year 2, there are two products produced in a given economy: computers and bread. Suppose that there are no intermediate goods. In year 1, 20 computers are produced and sold at $1600 each, and in year 2,
28 computers are produced and sold at $2880 each. In year 1, 20,000 loaves of bread are sold for $4 each, and in year 2, 26,000 loaves of bread are sold for $4.40 each.
a. Nominal GDP in year 1 is $ and nominal GDP in year 2 is $ . (Round your responses to the nearest integer as needed.)
b. Calculate real GDP in each year and the percentage increase in real GDP from year 1 to year 2 by using year 1 as the base year. Next, do the same calculations by using the chain-weighting method.
Using year 1 as the base year, real GDP in year 1 is $,
real GDP in year 2 is $
and the percentage increase in real GDP from year 1 to year 2 is %. (Round responses for real GDP to the nearest integer as needed,
and round your response for the percentage increase to three decimal places as needed.)
Using the chain-weighting method, real GDP (in year 1 dollars) in year 1 is $, real GDP in year 2 (in year 1 dollars) is $
and the percentage increase in real GDP from year 1 to year 2 is %. (Round responses for real
GDP to the nearest integer as needed, and round your response for the percentage increase to three decimal places as needed.)
c. Calculate the implicit GDP price deflator and the percentage inflation rate from year 1 to year 2
using year 1 as the base year. Next, do the same calculations by using the chain-weighting method.
Using year 1 as the base year, the implicit GDP price deflator in year 1 is , and the implicit GDP price deflator in year 2 is
(Round your responses to two decimal places as needed.)
Based on these results for the implicit GDP price deflator, the rate of inflation between years 1 and 2 is %. (Round your response to two decimal places as needed.)
Using the chain-weighting method, the implicit GDP price deflator (based on values in year 1 dollars) in year 1 is
and the implicit GDP price deflator (based on values in year 1 dollars) in year 2 is |. (Round your
responses to two decimal places as needed.)
Based on these results for the implicit GDP price deflator, the rate of inflation between years 1 and 2 is %. (Round your response to two decimal places as needed.)
d. Suppose that computers in year 2 are twice as productive as computers in year 1. How does this change your calculations in parts (a)-(c)? Explain any differences.
A reasonable way to account for the fact that computers in year 2 are twice as productive as computers in year 1 in the calculations in parts (a)-(c) would be to define a "computer" as a "year 1 computer," which would entail
the year 1 quantity of computers,
the year 1 price of computers,
V the year 2 quantity of computers, and
V the year 2 price of computers.
If this method of accounting for the fact that computers in year 2 are twice as productive as computers in year 1 were applied, then compared to the results from part (a), nominal GDP in year 1 would be
V and
nominal GDP in year 2 would be
If this method of accounting for the productivity increase were applied, then compared to part (b), the percentage increase in real GDP from year 1 to year 2 using year 1 as the base year would be
and the
percentage increase in real GDP from year 1 to year 2 using the chain-weighting method would be
Compared to part (b), the signed difference in the percentage increase in real GDP from year 1 to year 2 between
two calculations (year 1 base year minus chain-weighting) would be
If this method of accounting for the productivity increase were applied, then compared to part (b), the rate of inflation between years 1 and 2 based on the implicit GDP price deflator using year 1 as the base year would be
and the rate of inflation between years 1 and 2 based on the implicit GDP price deflator using the chain-weighting method would be
Compared to part (c), the signed difference in the rate of inflation
from year 1 to year 2 between two calculations (year 1 base year minus chain-weighting) would be
Transcribed Image Text:In year 1 and year 2, there are two products produced in a given economy: computers and bread. Suppose that there are no intermediate goods. In year 1, 20 computers are produced and sold at $1600 each, and in year 2, 28 computers are produced and sold at $2880 each. In year 1, 20,000 loaves of bread are sold for $4 each, and in year 2, 26,000 loaves of bread are sold for $4.40 each. a. Nominal GDP in year 1 is $ and nominal GDP in year 2 is $ . (Round your responses to the nearest integer as needed.) b. Calculate real GDP in each year and the percentage increase in real GDP from year 1 to year 2 by using year 1 as the base year. Next, do the same calculations by using the chain-weighting method. Using year 1 as the base year, real GDP in year 1 is $, real GDP in year 2 is $ and the percentage increase in real GDP from year 1 to year 2 is %. (Round responses for real GDP to the nearest integer as needed, and round your response for the percentage increase to three decimal places as needed.) Using the chain-weighting method, real GDP (in year 1 dollars) in year 1 is $, real GDP in year 2 (in year 1 dollars) is $ and the percentage increase in real GDP from year 1 to year 2 is %. (Round responses for real GDP to the nearest integer as needed, and round your response for the percentage increase to three decimal places as needed.) c. Calculate the implicit GDP price deflator and the percentage inflation rate from year 1 to year 2 using year 1 as the base year. Next, do the same calculations by using the chain-weighting method. Using year 1 as the base year, the implicit GDP price deflator in year 1 is , and the implicit GDP price deflator in year 2 is (Round your responses to two decimal places as needed.) Based on these results for the implicit GDP price deflator, the rate of inflation between years 1 and 2 is %. (Round your response to two decimal places as needed.) Using the chain-weighting method, the implicit GDP price deflator (based on values in year 1 dollars) in year 1 is and the implicit GDP price deflator (based on values in year 1 dollars) in year 2 is |. (Round your responses to two decimal places as needed.) Based on these results for the implicit GDP price deflator, the rate of inflation between years 1 and 2 is %. (Round your response to two decimal places as needed.) d. Suppose that computers in year 2 are twice as productive as computers in year 1. How does this change your calculations in parts (a)-(c)? Explain any differences. A reasonable way to account for the fact that computers in year 2 are twice as productive as computers in year 1 in the calculations in parts (a)-(c) would be to define a "computer" as a "year 1 computer," which would entail the year 1 quantity of computers, the year 1 price of computers, V the year 2 quantity of computers, and V the year 2 price of computers. If this method of accounting for the fact that computers in year 2 are twice as productive as computers in year 1 were applied, then compared to the results from part (a), nominal GDP in year 1 would be V and nominal GDP in year 2 would be If this method of accounting for the productivity increase were applied, then compared to part (b), the percentage increase in real GDP from year 1 to year 2 using year 1 as the base year would be and the percentage increase in real GDP from year 1 to year 2 using the chain-weighting method would be Compared to part (b), the signed difference in the percentage increase in real GDP from year 1 to year 2 between two calculations (year 1 base year minus chain-weighting) would be If this method of accounting for the productivity increase were applied, then compared to part (b), the rate of inflation between years 1 and 2 based on the implicit GDP price deflator using year 1 as the base year would be and the rate of inflation between years 1 and 2 based on the implicit GDP price deflator using the chain-weighting method would be Compared to part (c), the signed difference in the rate of inflation from year 1 to year 2 between two calculations (year 1 base year minus chain-weighting) would be
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