Macroeconomics: Private and Public Choice
15th Edition
ISBN: 9781285453545
Author: Russell Sobel; Richard Stroup; James Gwartney; David Macpherson
Publisher: South-Western College Pub
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Chapter 7, Problem 6CQ
To determine
Identify the price indexes and explain its outline.
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Using the data in the table, compare the percentage rates of change in nominal GDP, real GDP, and the GDP Price Index over these three time periods. Note changes in the magnitudes of each. Are there periods when prices grew more rapidly? Are there periods where real output grew more rapidly? Note how these affect the percentage change in nominal GDP. Make specific observations based on the information in the table.
What is the difference between using a measure of inflation such as the consumer prices index (CPI) and the GDP deflator? Which do you think is the more accurate measure of price changes in an economy?
How do we adjust GDP for changes in the price level?
Chapter 7 Solutions
Macroeconomics: Private and Public Choice
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- Define consumer price index And tell why it is important to the economy.arrow_forwardYou can use a price index to study the buying habits of individuals? True or falsearrow_forwardThe table below presents a brief summary of City A’s total spending, local GDP, and population changes. Read the table and answer the following questions. 2010 2020 Total spending ($ million) 89 104.12 Local GDP ($ millions) 110 134 Population 50,000 56,275 CPI deflators (2012=1) 0.96 1.05 Calculate % change for City A’s total spending from 2010 to 2020 in current dollars. *Results round to the nearest 2 decimal places. Calculate % change for City A’s total spending from 2010 to 2020 in constant dollars. *Results round to the nearest 2 decimal places. Why does % change calculated from constant dollars differ from % change calculated from current dollar? Calculate per capita spending in 2010 and 2020, respectively, using constant dollars. *Results round to the nearest dollar. 2010 per capita spending: 2020 per capita spending: Calculate the compound annual growth rate of per capita spending from 2010 to 2020…arrow_forward
- The table below presents a brief summary of City Y’s total spending, local GDP, and population changes. Read the table and answer the following questions. 2010 2020 Total spending ($ million) 89 104.12 Local GDP ($ millions) 110 134 Population 50,000 56,275 CPI deflators (2012=1) 0.96 1.05 Calculate per capita spending in 2010 and 2020, respectively, using constant dollars. *Results round to the nearest dollar. Calculate the compound annual growth rate of per capita spending from 2010 to 2020 Interpret what the two spending-to-GDP ratios tell us about City Y’s spending trend. Assuming City Y’s population grows at a constant rate in the next decade. Based on the information in the table, estimate City Y’s population in 2030.arrow_forwardneed help with this one. Using the data in the table below related to nominal GDP and the chain-weighted price deflators for gross domestic product (e.g., price index for GDP), answer the following questions:arrow_forwardDefine Economic events.arrow_forward
- The table below presents a brief summary of City A’s total spending, local GDP, and population changes. Read the table and answer the following questions. 2010 2020 Total spending ($ million) 89 104.12 Local GDP ($ millions) 110 134 Population 50,000 56,275 CPI deflators (2012=1) 0.96 1.05 Calculate per capita spending in 2010 and 2020, respectively, using constant dollars. *Results round to the nearest dollar. 2010 per capita spending: 2020 per capita spending: 2. Calculate the compound annual growth rate of per capita spending from 2010 to 2020 3. Calculate spending-to-GDP ratios in 2010 and 2020, respectively. *Results round to the nearest 2 decimal places. 2010 spending-to-GDP ratio: 2020 spending-to-GDP ratio: Interpret what the two spending-to-GDP ratios tell us about City A’s spending trend. 4. Assuming City A’s population grows at a constant rate in the next decade.…arrow_forwardDefine GDParrow_forwardWhat is GDP deflator? What for do we use GDP deflator?arrow_forward
- How do you calculate potential GDP when you are given this chart?arrow_forwardYour 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.arrow_forwardYour 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 Using basket from your answer to question (a), calculate the CPI for 2020 and 2021, and the inflation rate for 2021.arrow_forward
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