Economics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (7th Edition)
7th Edition
ISBN: 9780134833392
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
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Chapter 19, Problem 19.1.7PA
To determine
Final Goods and services.
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The magazine Women of China reported that Chinese women in big cities spent 63% of their income on consumer goods last year, up from a meagre 26% in 2007. Clothing accounted for the biggest chunk of that spending, at nearly 30%, followed by digital products such as cellphones and cameras (11%) and travel (10%). Chinese consumption as a whole grew faster than the overall economy in the first half of the year and is expected to reach 42% of GDP by 2020, up from the current 36%.
Source: The Wall Street Journal, August 27, 2010
If the economy had been operating at a full employment equilibrium,
(a) Describe the macroeconomic equilibrium after the rise in consumer spending.
(b) Explain and draw a graph to illustrate how the economy can adjust in the long run to restore a full-employment equilibrium.
Assume an economy in which only broccoli and cauliflower are produced. In year 1, 500 million pounds of broccoli are produced and consumed and its price is $0.50 per pound, while 300 million pounds of cauliflower are produced and consumed and its price is $0.80 per pound. In year 2, 400 million pounds of broccoli are produced and consumed and its price is $0.60 per pound, while 350 million pounds of cauliflower are produced and consumed and its price is $0.85 per pound.
(a) Using year 1 as the base year, calculate the GDP price deflator in years 1 and 2, and calculate the rate of inflation between years 1 and 2 from the GDP price deflator.
(b) Using year 1 as the base year, calculate the CPI in years 1 and 2, and calculate the CPI rate of inflation.
Briefly discuss five reasons why a rise in real Gross Domestic Product within a country over time does not necessarily mean that living standards have improved.
Chapter 19 Solutions
Economics, Student Value Edition Plus MyLab Economics with Pearson eText -- Access Card Package (7th Edition)
Ch. 19 - Prob. 19.1.1RQCh. 19 - Prob. 19.1.3RQCh. 19 - Prob. 19.1.4RQCh. 19 - Prob. 19.1.5RQCh. 19 - Prob. 19.1.6PACh. 19 - Prob. 19.1.7PACh. 19 - Prob. 19.1.8PACh. 19 - Prob. 19.1.9PACh. 19 - Prob. 19.1.10PACh. 19 - Prob. 19.1.11PA
Ch. 19 - Prob. 19.1.14PACh. 19 - Prob. 19.2.1RQCh. 19 - Prob. 19.2.2RQCh. 19 - Prob. 19.2.3RQCh. 19 - Prob. 19.2.4PACh. 19 - Prob. 19.2.9PACh. 19 - Prob. 19.2.10PACh. 19 - Prob. 19.3.1RQCh. 19 - Prob. 19.3.2RQCh. 19 - Prob. 19.3.3RQCh. 19 - Prob. 19.3.4PACh. 19 - Prob. 19.3.5PACh. 19 - Prob. 19.3.6PACh. 19 - Prob. 19.3.7PACh. 19 - Prob. 19.3.8PACh. 19 - Prob. 19.3.9PACh. 19 - Prob. 19.3.10PACh. 19 - Prob. 19.4.1RQCh. 19 - Prob. 19.4.3RQCh. 19 - Prob. 19.4.4PACh. 19 - Prob. 19.4.6PACh. 19 - Prob. 19.4.7PACh. 19 - Prob. 19.4.8PACh. 19 - Prob. 19.1RDECh. 19 - Prob. 19.2RDECh. 19 - Prob. 19.6RDECh. 19 - Prob. 19.7RDE
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