2. Consider an economy that produces only two types of fruits: mangos and bananas. The production and price for the base year (a few years ago) and the current year are as follows: Fruit Mango Banana Base Year Quantity 10 bags 22 bags Price $4 per bag $1 per bag Current Year Quantity 12 bags 24 bags Price $5 per bag $1.5 per bag a. Compute nominal GDP in the current year and in the base year. What is the percentage increase since the base year? b. Compute real GDP in the current year and in the base year. By what percentage does real GDP increase from the base year to the current year? c. Assume that the expenditure base to compute the CPI is base-year quantities. Calculate the CPI (Price Index) in both years and the inflation rate using the CPI.
2. Consider an economy that produces only two types of fruits: mangos and bananas. The production and price for the base year (a few years ago) and the current year are as follows: Fruit Mango Banana Base Year Quantity 10 bags 22 bags Price $4 per bag $1 per bag Current Year Quantity 12 bags 24 bags Price $5 per bag $1.5 per bag a. Compute nominal GDP in the current year and in the base year. What is the percentage increase since the base year? b. Compute real GDP in the current year and in the base year. By what percentage does real GDP increase from the base year to the current year? c. Assume that the expenditure base to compute the CPI is base-year quantities. Calculate the CPI (Price Index) in both years and the inflation rate using the CPI.
Brief Principles of Macroeconomics (MindTap Course List)
8th Edition
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter5: Measuring A Nation's Income
Section: Chapter Questions
Problem 6PA
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Transcribed Image Text:2. Consider an economy that produces only two types of fruits: mangos and bananas. The production
and price for the base year (a few years ago) and the current year are as follows:
Fruit
Mango
Banana
Base Year
Quantity
10 bags
22 bags
Price
$4 per bag
$1 per bag
Current Year
Quantity
12 bags
24 bags
Price
$5 per bag
$1.5 per bag
a. Compute nominal GDP in the current year and in the base year. What is the percentage increase
since the base year?
b. Compute real GDP in the current year and in the base year. By what percentage does real GDP
increase from the base year to the current year?
c. Assume that the expenditure base to compute the CPI is base-year quantities. Calculate the CPI
(Price Index) in both years and the inflation rate using the CPI.
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