Question I 1. Explain briefly what the consumer price index tries to measure? 2. Describe three problems that make the consumer price index an imperfect measure of the cost of living. 3. List two (2) differences between the consumer price index and the GDP deflator? Question 2 Calculate the missing information in the table 1.1 taking into consideration that the base year is 2015. When answering the question kindly reproduce the table and insert your answers. Year Price of books Quantity of books Price of socks Quantity of socks Growth rate Nominal GDP Inflation rate Real GDP GDP Deflator CPI 2015 10 120 12 200 2016 12 300 15 200 2017 14 275 18 180 Question 3 Use the analysis for the market for loanable funds diagrams to examine and explain both in words and diagrammatically how the following government policy affect the economy’s saving and investment. Policy 1: Suppose the government passed a tax reform giving an investment tax credit to any firm building a new factory or buying a new piece of equipment. [Kindly note diagram is 10 marks & explanation
Question I
1. Explain briefly what the
2. Describe three problems that make the consumer price index an imperfect measure of the cost
of living.
3. List two (2) differences between the consumer price index and the
Question 2
Calculate the missing information in the table 1.1 taking into consideration that the base year is
2015.
When answering the question kindly reproduce the table and insert your answers.
Year Price of
books
Quantity
of
books
Price
of
socks
Quantity
of socks
Growth
rate
Nominal
GDP
Inflation
rate
Real
GDP
GDP
Deflator
CPI
2015 10 120 12 200
2016 12 300 15 200
2017 14 275 18 180
Question 3
Use the analysis for the market for loanable funds diagrams to examine and explain both in words and
diagrammatically how the following government policy affect the economy’s saving and investment.
Policy 1: Suppose the government passed a tax reform giving an investment tax credit to any firm
building a new factory or buying a new piece of equipment. [Kindly note diagram is 10 marks &
explanation
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