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
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
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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