Suppose that people in the small island country of Mudotch produce and consume rice and beans as follows. Rice Beans Year Quantity Price Quantity Price YearO 20 5 15 7 Year1 25 7 17 10 Year2 35 9 20 16 1. Calculate the consumer price index (CPI) in each year using YearO as the base year. Show your work. 2. Using your CPI in (a), what is the inflation rate in Year1 and Year2? Show your work. 3. Calculate the GDP deflator in each year using YearO as the base year. Show your work. 4. Using your GDP deflator in (c), what is the inflation rate in Year1 and Year2? Show your work. 5. Is the inflation rate in Year2 the same in (b) and (d)? Explain why or why not.
Suppose that people in the small island country of Mudotch produce and consume rice and beans as follows. Rice Beans Year Quantity Price Quantity Price YearO 20 5 15 7 Year1 25 7 17 10 Year2 35 9 20 16 1. Calculate the consumer price index (CPI) in each year using YearO as the base year. Show your work. 2. Using your CPI in (a), what is the inflation rate in Year1 and Year2? Show your work. 3. Calculate the GDP deflator in each year using YearO as the base year. Show your work. 4. Using your GDP deflator in (c), what is the inflation rate in Year1 and Year2? Show your work. 5. Is the inflation rate in Year2 the same in (b) and (d)? Explain why or why not.
Chapter7: Unemployment And Inflation
Section: Chapter Questions
Problem 3.7P
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Transcribed Image Text:Suppose that people in the small island country of Mudotch produce and consume rice and beans as follows.
Rice
Beans
Year
Quantity
Price
Quantity
Price
YearO
20
5
15
7
Year1
25
7
17
10
Year2
35
9
20
16
1. Calculate the consumer price index (CPI) in each year using YearO as the base year. Show your work.
2. Using your CPI in (a), what is the inflation rate in Year1 and Year2? Show your work.
3. Calculate the GDP deflator in each year using YearO as the base year. Show your work.
4. Using your GDP deflator in (c), what is the inflation rate in Year1 and Year2? Show your work.
5. Is the inflation rate in Year2 the same in (b) and (d)? Explain why or why not.
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