Macroeconomics: Private and Public Choice
15th Edition
ISBN: 9781285453545
Author: Russell Sobel; Richard Stroup; James Gwartney; David Macpherson
Publisher: South-Western College Pub
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Chapter 7, Problem 6CQ
To determine
Identify the
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What is the difference between using a measure of inflation such as the consumer prices index (CPI) and the GDP deflator? Which do you think is the more accurate measure of price changes in an economy?
How do we adjust GDP for changes in the price level?
a) Calculate GDP Deflator of 2009.
b) Calculate the Growth rate of real GDP of 2009.
c) What can you conclude from your answer to part a.
d) What can you conclude from your answer to part b.
Please answer all and answer must be correct.
Chapter 7 Solutions
Macroeconomics: Private and Public Choice
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- Define consumer price index And tell why it is important to the economy.arrow_forwardThe table below presents a brief summary of City A’s total spending, local GDP, and population changes. Read the table and answer the following questions. 2010 2020 Total spending ($ million) 89 104.12 Local GDP ($ millions) 110 134 Population 50,000 56,275 CPI deflators (2012=1) 0.96 1.05 Calculate % change for City A’s total spending from 2010 to 2020 in current dollars. *Results round to the nearest 2 decimal places. Calculate % change for City A’s total spending from 2010 to 2020 in constant dollars. *Results round to the nearest 2 decimal places. Why does % change calculated from constant dollars differ from % change calculated from current dollar? Calculate per capita spending in 2010 and 2020, respectively, using constant dollars. *Results round to the nearest dollar. 2010 per capita spending: 2020 per capita spending: Calculate the compound annual growth rate of per capita spending from 2010 to 2020…arrow_forwardYou can use a price index to study the buying habits of individuals? True or falsearrow_forward
- Define Economic events.arrow_forwardcalculate the GDP deflator for 2012 and 2013 as well as the inflation rate for 2012 and 2013 using the GDP deflator.arrow_forwardThe table below presents a brief summary of City A’s total spending, local GDP, and population changes. Read the table and answer the following questions. 2010 2020 Total spending ($ million) 89 104.12 Local GDP ($ millions) 110 134 Population 50,000 56,275 CPI deflators (2012=1) 0.96 1.05 Calculate per capita spending in 2010 and 2020, respectively, using constant dollars. *Results round to the nearest dollar. 2010 per capita spending: 2020 per capita spending: 2. Calculate the compound annual growth rate of per capita spending from 2010 to 2020 3. Calculate spending-to-GDP ratios in 2010 and 2020, respectively. *Results round to the nearest 2 decimal places. 2010 spending-to-GDP ratio: 2020 spending-to-GDP ratio: Interpret what the two spending-to-GDP ratios tell us about City A’s spending trend. 4. Assuming City A’s population grows at a constant rate in the next decade.…arrow_forward
- What is GDP deflator? What for do we use GDP deflator?arrow_forwardWhat is the Consumer Price Index?arrow_forwardA small nation of 10 people idolizes the TV show The Voice. All they produce and consume are karaoke machines and CDs, in the following amounts: 2020 2021 Karaoke Machines Price (Dollars) 20 Quantity 10 15 30 CDs Quantity 50 60 Price (Dollars) 13 15 Using a method similar to that used to calculate the consumer price index, the percentage change in the overall price level is Use 2020 as the base year, and fix the basket at 1 karaoke machine and 5 CDs.) Using a method similar to that used to calculate the GDP deflator, the percentage change of the overall price level is use 2020 as the base year.) Which of the following statements is correct? Check all that apply. The inflation rate in 2021 is not the same using the two methods. The CPI holds the basket of goods and services constant. The GDP deflator allows the basket of goods and services to change. . (Note: (Note: Again,arrow_forward
- What is the U.S. GDP for the 1st quarter of 2017?arrow_forwardWhat items are included in the calculation of GDP using the income approach ?arrow_forwardIf the price of imported extra virgin olive oil decreases, then both the GDP deflator and the consumer price index will decrease. neither the GDP deflator nor the consumer price index will decrease. the GDP deflator will decrease, but the consumer price index will not decrease. the consumer price index will decrease, but the GDP deflator will not decrease.arrow_forward
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