4. A small nation of ten people idolizes the TV show American Idol. All they produce and consume are karaoke machine and CDs, in the following amounts: Year Karaoke Machines CDs Quantity Price per unit Quantity Price per unit 2011 30 $50 80 $20 2012 40 $70 100 $30 Using a method similar to the consumer price index, compute the percentage change in the overall price level. Use 2011 as the base year and fix the basket at 1 karaoke machine and 3 CDs. i) Using a method similar to the GDP deflator, compute the percentage change in the overall price level. Use 2011 as the base year. Is the inflation rate in 2012 the same using the two methods? Explain why or why not? ii) iii)

4. A small nation of ten people idolizes the TV show American Idol. All they produce and consume are karaoke machine and CDs, in the following amounts: Year Karaoke Machines CDs Quantity Price per unit Quantity Price per unit 2011 30 $50 80 $20 2012 40 $70 100 $30 Using a method similar to the consumer price index, compute the percentage change in the overall price level. Use 2011 as the base year and fix the basket at 1 karaoke machine and 3 CDs. i) Using a method similar to the GDP deflator, compute the percentage change in the overall price level. Use 2011 as the base year. Is the inflation rate in 2012 the same using the two methods? Explain why or why not? ii) iii)

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 5PA

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Similar questions

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