Calculation of inflation rate using PCE and CPI .

Question

Want to see the full answer?

Answer 1

Question

Chapter 15, Problem 15.3RDE

(a):

To determine

Calculation of inflation rate using PCE and CPI.

(b):

To determine

Identify which of three measures of inflation was highest during the year.

Expert Solution & Answer

Want to see the full answer?

Check out a sample textbook solution

See solution

Students have asked these similar questions

Consider an economy that produces and consumes bread and automobiles. In the following table are data for two different years. Year 2000 2010 Price of an automobile $40,000 $50,000 Price of a loaf bread $20 $30 Number of auto-mobiles produced 100 cars 120 cars Number of loaves of bread produced 600,000 loaves 500,000 loaves Using the year 2000, compute the following statistics for each year: nominal GDP, real GDP, the implicit price deflator for GDP, and a fixed-weight price index such as CPI. How much have prices risen between year 2000 and year 2010? Compare answers given by Laspeyres and Passche price indices. Suppose you are a senior public servant writing a bill to index Social Security and pensions. That is your bill will adjust these benefits to offset changes in the cost of living. Will you use the GDP deflator or the CPI? Explain emphasis on questions 2 and 3 .

Calculate the four components of aggregate expenditure and GDP for the following economy using data from the table below.Instructions: Enter your responses as whole numbers. If you are entering any negative numbers, be sure to include a negative (-) sign in front of those numbers. GDP Consumption expenditures $550 Exports $100 Government purchases of goods and services $200 Construction of new homes and apartments $200 Sales of existing homes and apartments $200 Imports $50 Beginning-of-year inventory stocks $100 End-of-year inventory stocks $50 Business fixed investment $100 Government payments to retirees $100 Household purchases of durable goods $150 Consumption expenditures: $ Investment expenditures: $ Government Purchases: $ Net Exports: $ GDP: $

Your first job after graduation is in the statistical office of the small country Exemplia, where most people are employed in olive groves and love eating olives. Based on the most important transactions in Exemplia summarised in below table, you are tasked with calculating the consumer price index with base year 2020. 2020 2021 Price Quantity Price Quantity Olives (domestic consumption) 2 2,000 2.20 2,100 Olives (export) 2 4,000 2.20 3,600 Potatoes imported 1 1,000 1 800 Government‘s purchase of pencils 0.50 10,000 1 6,000 Olive picking machines (imported) 100 10 110 10 a) Determine a suitable basket. b) Using basket from your answer to question (a), calculate the CPI for 2020 and 2021, and the inflation rate for 2021. c) Briefly discuss the most important differences between the calculation of the CPI and the GDP deflator and their consequences.