2017 2018 apples sold 1 billion at £1 each 2 billion at £2 each bananas sold 1 billion at £1 each 2 billion at £3 each nominal GDP: 2017=2 billion, 2018=10 billion real GDP: 2017=2 billion, 2018=4 billion GDP deflator: 2017=100, 2018=250 CPI index: 2017=100, 2018=250 Using the GDP deflator and CPI index above explain whether the change in the CPI between year 2017 and 2018 overstate, understate or correctly state the change in the “cost of living”. Distinguish between this particular numerical case and the general case

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A: Real vs. Nominal GDP Nominal GDP is the market value of goods and services produced in an economy,…

Q: Why is CPI an imperfect measure of the cost of living? Explain how CPI differs from the GDP deflator…

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A: a.

Q: Distinguish between the Consumer Price Index (CPI) and the Producer Price Index (PPI)

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