(a) The following table shows the outputs and prices of three products produced by an economy in 2018, 2019 and 2020. 2020 Quantity Price $4 $6 2018 2019 Price $5 $3 $6 Quantity Price $6 $5 $5 Product Quantity Rice 500 550 600 Shirt 400 420 450 Shoes 200 250 $8 280 (i) Measure the nominal GDP, the real GDP and the GDP deflator in 2019 and 2020, taking 2018 as the base year. Using the GDP deflator, measure the inflation rate in the economy between 2018 and 2019, and also between 2019 and 2020. (ii) (b) Assume all household consumption items are locally produced as shown in the table in Question (a). A typical household in the economy consumes 5 units of rice, 4 units of shirt and 2 units of shoes in 2018. Using 2018 as the base year, measure the CPI for 2019 and 2020 and the inflation rate between 2018 and 2019, and also between 2019 and 2020. Explain why the inflation rate is different from those computed from (a)(ii). (c) "Human canital is more important than phyeical canital in economic growrth"
(a) The following table shows the outputs and prices of three products produced by an economy in 2018, 2019 and 2020. 2020 Quantity Price $4 $6 2018 2019 Price $5 $3 $6 Quantity Price $6 $5 $5 Product Quantity Rice 500 550 600 Shirt 400 420 450 Shoes 200 250 $8 280 (i) Measure the nominal GDP, the real GDP and the GDP deflator in 2019 and 2020, taking 2018 as the base year. Using the GDP deflator, measure the inflation rate in the economy between 2018 and 2019, and also between 2019 and 2020. (ii) (b) Assume all household consumption items are locally produced as shown in the table in Question (a). A typical household in the economy consumes 5 units of rice, 4 units of shirt and 2 units of shoes in 2018. Using 2018 as the base year, measure the CPI for 2019 and 2020 and the inflation rate between 2018 and 2019, and also between 2019 and 2020. Explain why the inflation rate is different from those computed from (a)(ii). (c) "Human canital is more important than phyeical canital in economic growrth"
Chapter6: Tracking The U.s. Economy
Section: Chapter Questions
Problem 1.3P
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Question
Transcribed Image Text:(a)
The following table shows the outputs and prices of three products produced by
an economy in 2018, 2019 and 2020.
2020
Quantity Price
$4
$6
2018
2019
Quantity Price
$6
$5
$5
Product
Price
Quantity
Rice
$5
$3
$6
500
550
600
Shirt
400
420
450
Shoes
200
250
$8
280
(i)
Measure the nominal GDP, the real GDP and the GDP deflator in 2019
and 2020, taking 2018 as the base year.
Using the GDP deflator, measure the inflation rate in the economy
between 2018 and 2019, and also between 2019 and 2020.
(ii)
(b)
Assume all household consumption items are locally produced as shown in the
table in Question (a). A typical household in the economy consumes 5 units of
rice, 4 units of shirt and 2 units of shoes in 2018. Using 2018 as the base year,
measure the CPI for 2019 and 2020 and the inflation rate between 2018 and 2019,
and also between 2019 and 2020. Explain why the inflation rate is different from
those computed from (a)(ii).
(c)
"Human capital is more important than physical capital in economic growth".
Discuss the statement and explain whether you agree with it.
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