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A small nation of ten people idolizes the TV show The Voice. All they produce and consume are karaoke machines and CDs, in the following amounts: a. Using a method similar to the CPI, compute the percentage change in the overall price level. Use 2017 as the base year and fix the basket at 1 karaoke machine and 3 CDs. b. Using a method similar to the GUP deflator, compute the percentage change in the overall price level. Also use 2017 as the base year. c. Is the inflation rate in 2018 the same using the two methods? Explain why or why not.

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Principles of Macroeconomics (Mind...

7th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781285165912
BuyFind

Principles of Macroeconomics (Mind...

7th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781285165912

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Chapter
Section
Chapter 11, Problem 5PA
Textbook Problem

A small nation of ten people idolizes the TV show The Voice. All they produce and consume are karaoke machines and CDs, in the following amounts:

Chapter 11, Problem 5PA, A small nation of ten people idolizes the TV show The Voice. All they produce and consume are

a. Using a method similar to the CPI, compute the percentage change in the overall price level. Use 2017 as the base year and fix the basket at 1 karaoke machine and 3 CDs.

b. Using a method similar to the GUP deflator, compute the percentage change in the overall price level. Also use 2017 as the base year.

c. Is the inflation rate in 2018 the same using the two methods? Explain why or why not.

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