Bundle: Principles of Economics, Loose-leaf Version, 8th + LMS Integrated MindTap Economics, 2 terms (12 months) Printed Access Card
8th Edition
ISBN: 9781337607735
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 24, Problem 3QR
To determine
Effect on CPI and GDP deflator.
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Does an increase in the price of imported Frenchwine affect the CPI or the GDP deflator more? Why?
Does an increase in the price of imported Belgian chocolate affect the CPI or the GDP deflator more? Why
How does the CPI compare the cost of the typical market basket of goods and services?
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Bundle: Principles of Economics, Loose-leaf Version, 8th + LMS Integrated MindTap Economics, 2 terms (12 months) Printed Access Card
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- If only cars and bikes are sold in a country and the consumer price index(CPI) has exceeded the GDP deflator what does this mean for the prices of the cars and the bike? they remain the same? Do they change differently? how does the GDP deflator supposed to move with CPI?arrow_forwardOver a long period of time, the price of a candybar rose from $0.20 to $1.20. Over the same period,the CPI rose from 150 to 300. Adjusted for overallinflation, how much did the price of the candy barchange?arrow_forwardIn compiling data for the CPI, the Bureau of Labor Statistics makes no attempt to adjust the data to reflect quality changes.” True or false? Explain.arrow_forward
- Which do you think has a greater effect on the CPI:a 10 percent increase in the price of chicken or a10 percent increase in the price of caviar? Why?arrow_forwardIf A senior public is servant writing a bill to index Social Security and pensions so that the bill will adjust these benefits to offset changes in the cost of living. What will be used; the GDP deflator or the CPI? (short explanation)arrow_forwardWhat does the Consumer Price Index (CPI) measure? Be specific about what the categories of goods and services that the CPI tracks and measures.arrow_forward
- Describe the three problems that make the CPI animperfect measure of the cost of living.arrow_forwardThe CPI measures the price of all consumer goods. Is this true or false?arrow_forwardQUESTION 4 a. In each case of following cases, does the increase in prices affect CPI, GDP deflator, or both in Pakistan? Analyze and Justify your answer. i. The price of imported Belgian chocolate has increased. ii. The price of imported equipment used in industrial level ice-cream production has increased. iii. The price of Millat Tractors has increased.arrow_forward
- Why is CPI an imperfect measure of the cost of living? Explain how CPI differs from the GDP deflator in measuring the overall price level of an economy.arrow_forwardDescribe how the CPI is calculated. How might the CPI overstate the true increase in cost of living?arrow_forwardAs a result of a drought, prices and produced quantities in a country change as follows: Assume that the economy produces and consumes only the above agricultural products.a) Calculate the nominal GDP and the real GDP for the year 2021 with the base year 2020.b) By how many percent have the prices of goods increased?c) Calculate the CPI for the year 2021 according to Laspeyres and Paasche.d) Describe the general differences between the CPI and the GDP deflator.arrow_forward
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