sumes bread and automobiles. In the following table are data for two different years. 2000 2010 Good Quantity Price Quantity Price Automobiles 100 $50,000 120 $60,000 Bread 500,000 $10 400,000 $20 a. Using 2000 as the base year, compute the following statistics for each year: nominal GDP, real GDP, the implicit price deflator for GDP, and a fixed-weight price index such as the CPI. b. How much did prices rise between 2000 and 2010? Compare the answers given by the Laspeyres and Paasche price indexes. Explain the difference. C. Suppose you are a senator writing a bill to index Social Security and federal pensions. That is, your bill will adjust these benefits to offset changes in the cost of living. Will you use the GDIP deflator or the CPIZ Why?
sumes bread and automobiles. In the following table are data for two different years. 2000 2010 Good Quantity Price Quantity Price Automobiles 100 $50,000 120 $60,000 Bread 500,000 $10 400,000 $20 a. Using 2000 as the base year, compute the following statistics for each year: nominal GDP, real GDP, the implicit price deflator for GDP, and a fixed-weight price index such as the CPI. b. How much did prices rise between 2000 and 2010? Compare the answers given by the Laspeyres and Paasche price indexes. Explain the difference. C. Suppose you are a senator writing a bill to index Social Security and federal pensions. That is, your bill will adjust these benefits to offset changes in the cost of living. Will you use the GDIP deflator or the CPIZ Why?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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