Quiz 3

Consider the data for a known country for the consumer price index (CPI), by components:(base year 2015 = 100) a) Interpret the value of the CPI index in December 2018. b) Calculate the year-on-year inflation rate corresponding to the CPI, in December 2018. c) Suppose the GDP Deflator in 2020 is predicted to be 1.09. What can be interpreted?

Question 1: In an economy, there are only two goods (Cars and cycles) produced. The data for last three years is given in the below table. Calculate the nominal and real GDP of three years and then find the GDP deflator for all the three years. Find year on year (YoY) inflation for 2018 and 2019. Note: the base year for this economy is given as 2017.   year Price of Car              (AED) Number of Car Price of cycle (AED) Number of cycle 2017 1000 10 200 900 2018 1200 15 210 1000 2019 1500 25 250 1500       Question 2: Explain the role of fiscal and monetary policy in an economy facing a recession. Use appropriate graph to justify your answer

Suppose an economy consumes only two goods: food and entertainment. The following table shows quantities consumed and prices for three years: Year 0 (the base year), Year 1, and Year 2. QUESTION; compute inflation rates (from year 0 to year 1 and from year 1 to year 2) based on GDP deflator   Item Year 0 Year 1 Year 2   Quantity (units) Price  ($ / unit) Quantity (units) Price  ($ / unit) Quantity (units) Price  ($ / unit) Food 50 5 75 6 80 4 Entertainment 100 12 110 11 115 14

A country produces only sugar and wheat in the quantities and prices listed below. The GDP deflator is given by Nominal GDP/Real GDP *100. If 2018 is the base year, i. What is the GDP deflator for years 2019 and 2020? Show your workings ii. What is the inflation rate year 2019-2020? Show your workings Year Price of sugar Quantity of sugar Price of wheat Quantity of wheat 2018 $2.00 200 $10 40 2019 $2.30 250 $14 50 2020 $2.75 280 $18 80

Consider the following data for a hypothetical economy that produces two goods, milk and cheese. Quantity Produced Mak (litres) Cheese (kg) 110 121 Year 1 Year 2 Prices Milk (Slitro) Cheese (S/kg) 6 7 66 3 Using year 1 as the base year, the 53 35% increase in nominal GDP may be explained by a % increase in real GDP and a 1% increase in prices (Round your responses to two decimal places)

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Because there isn't one single measure of inflation, the government and researchers use a variety of methods to get the most balanced picture of how prices fluctuate in the economy. Two of the most commonly used price indexes are the consumer price index (CPI) and the GDP deflator. The GDP deflator for this year is calculated by dividing the value of all goods and services produced in the economy this year using_________ by the___________using___________and multiplying by 100. However, the CPI reflects only the prices of all goods and services____________.

1.20 A nation's gross domestic product is... a) C+1+ G + (X-M) b) The total amount of money in circulation c) The total market value of all the intermediate goods and services d) The sum of value added at some stages of the production process 1.21 If real GDP falls from one period to another and the price level stays the same, we can conclude that... a) Nominal GDP increased b) Inflation decreased c) Nominal GDP also decreased d) NDP increased 1.22 Which of the following explains why redistribution occurs during inflation? a) Rising prices fail to signal desirable changes in the mix of output. b) Because all prices do not change at the same rate, people buy different combinations of goods and services and own different combinations of wealth. c) Relative prices remain unchanged. d) All loans are indexed to inflation.

The Republic of Venturilla produces three goods: coffee, water and wine. Below is a table showing prices and quantities of output for three years: Year Price of Coffee Coffee Price of Water Water Price of Wine Wine 2017 $10 100 $2500 $ 12 120 2018 $14 150 $3 400 $15 110 2019 $12 175 $4 300 $15 100 1 Calculate economic growth (% A in real GDP) between 2018 and 2019 2 Calculate inflation between 2017 and 2018.

A) Macroeconomics is concerned with:   only long-run trends in economic activity. only short-run fluctuations in the business cycle. both long-run trends and short-term fluctuations in economic activity. only with changes in the overall price level.   GDP is: a) a measure of all spending in the economy on               foreign and domestic goods and services. b) the total market value of all final goods and  services produced in an economy in a given       year. c) the value of all output produced within an      economy. d) made up of three components: consumption,      investment, and government expenditure.

The table below shows nominal GDP (Y) data for Dream Island for 1990 and 2005. Also shown are data for the GDP deflator (P) and the population (N). Calculate annual growth rates for GDP and population and the average inflation rate for the 15 years. Then calculate real GDP growth and per- capita, real GDP growth annually for that period. Year Nominal GDP deflator Population GDP (1997-100) (in millions) (in $ millions) 1990 2708 71.7 220 2005 6738 126.1 260 a. Growth rate of Nominal GDP = b. Inflation rate = c. Growth rate of population = d. Growth rate of real GDP = e. Growth rate of real GDP per capita =

21 Macroeconomic Information for Mexico: 2020 Q2 GDP (in 2020 Q2 pesos) 4.97 trillion pesos 2020 Q1 GDP (in 2020 Q1 pesos) 6.09 trillion pesos 2020 Q2 GDP (in 2015 pesos) 3.76 trillion pesos 2020 Q1 GDP (in 2015 pesos) 4.54 trillion pesos   Calculate Mexico's inflation, using the GDP deflator method, between the first and second quarters of 2020.   (Enter your answer in percent form, rounded to one decimal place, without the percent sign.  For example, if your answer is 0.12345, enter 12.3.)

In Panel A that nominal GDP is larger than real GDP. Explain why nominal GDP is  larger than real GDP in 2022.

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Part A: The base year in a country for the calculation of national income data is 2012. Real GDP in this country grows at the rate of 5 percent per year. The GDP deflator in this country increases at the rate of 2 percent per year. If the real GDP in this country in 2011 was 20,000 manats, what would be the value of nominal GDP in 2013? Nominal GDP in 2013 = manats. Do you know what country uses manat as its currency? Part B: The base year in a country for the calculation of national income data is 2012. Real GDP in this country grows at the rate of 5 percent per year. Nominal GDP in this country increases at the rate of 8 percent per year. If the real GDP in this country in 2011 was 50,000 tenges, what would be the value of GDP deflator in 2013? GDP deflator in 2013- tenges. Do you know what country uses tenge as its currency?"

Assume that in Berberistan only three goods are produced: coffee, tea, and cheesecake. The table below shows the prices and quantities of the three goods in 2018, 2019 and 2020. (Take 2018 as the base year when necessary) 2018 2019 2020 Quantity price quantity Price quantity Price Coffee 2 20 6 10 5 12 Tea 20 20 2 25 3 Cheesecake 15 8 10 10 15 5 a) What is the nominal GDP in 2019. b) What is the nominal GDP in 2020. c) What is the real GDP in 2019. d) What is the real GDP in 2020. e) What is the real economic growth from 2019 to 2020.

A 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: Karaoke Machines CDs Quantity Price Quantity Price (Dollars) (Dollars) 2020 10 20 50 13 2021 15 30 60 15 Using a method similar to that used to calculate the consumer price index, the percentage change in the overall price level is . (Note: Use 2020 as the base year, and fix the basket at 1 karaoke machine and 5.

a) Explain the difference between real and nominal GDP. b) Why is GDP critically linked with inflation and unemployment rate? c) What can be done to beef up Pakistan's GDP on a sustainable basis?

The following table gives nominal and real GDP for an economy for two years. Based on the table, in Year 2, the value of the GDP deflator is Year 1 1430.0 1,300 Nominal GDP Real GDP (Round your answer to one decimal place.) The inflation rate between Year 1 and Year 2 is %. (Round your answer to one decimal place.) Year 2 1820.0 1560.0

Assume all of the cheese are used in the production of the cheeseburgers. Also assume that Year 1 is the base year.

The consumers in the economy buys only two general types of products: Apples, and Bananas. Price and Quantity information of these items over a period are shown below:   Year 2019 Year 2020 Product Quantity Average Price per Unit Quantity Average Price per Unit Apples 7 $5 9 $12 Bananas 18 $10 7 $16  Using year 2020 as the base year, the economy's consumer price index (CPI) in year 2019 is ______.  (Your answer should include the first decimal point, if any.)

Refer to the macroeconomic data from the Philippine Statistics Authority provided below to answer the next two (2) questions: Year 2019 2020 2021 GDP in million Php (Current prices) 19,517,863 17,951,573 19,410,568 GDP in million Php (2018 prices) 19,382,751 17,537,843 18,538,053 CPI (2012-100) 120.2 123.3 128.8

Refer to the macroeconomic data from the Philippine Statistics Authority provided below to answer the next two (2) questions: Year 2019 2020 2021 GDP in million Php (Current prices) 19,517,863 17,951,573 19,410,568 GDP in million Php (2018 prices) 19,382,751 17,537,843 18,538,053 CPI (2012-100) 120.2 123.3 128.8 2. What is the growth rate of the Philippine economy by 2021? a The nominal GDP growth rate is 8.12% while the real GDP growth rate is 5.70%. The nominal GDP growth rate is 5.70% while the real GDP growth rate is 8.12%. c. The nominal GDP growth rate is -8.12% while the real GDP growth rate is 5.70%. d. None of the above.

Answer the following questions. 1. What is the difference between Gross Domestic Product and Gross National Income? 2. Evaluate the statement: "Inflation reduces the purchasing power of the peso."

A 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:   Karaoke Machines CDs Quantity Price Quantity Price (Dollars) (Dollars) 2020 20 50 60 5 2021 21 70 80 6 Using a method similar to that used to calculate the consumer price index, the percentage change in the overall price level is   . (Note: Use 2020 as the base year, and fix the basket at 2 karaoke machines and 6 CDs.) Using a method similar to that used to calculate the GDP deflator, the percentage change of the overall price level is   . (Note: Again, use 2020 as the base year.) Which of the following statements is correct? Check all that apply. The CPI allows the basket of goods and services to change. The GDP deflator allows the basket of goods and services to change. The inflation rate in 2021 is not the same using the two methods.

As 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.