ECON 102 Lecture Notes - Lecture 6: Gdp Deflator, Nominal Interest Rate, Real Interest Rate
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9 Jun 2019
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Table 24-7. The table below applies to an economy with only two goods â hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs.
Year | Price of hamburgers | Price of hot dogs |
2009 | $5 | $3 |
2010 | 5.50 | 3.30 |
2011 | 5.61 | 3.63 |
Refer to Table 24-7. Between 2009 and 2011, the cost of living increased by
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The CPI is more commonly used as a gauge of inflation than the GDP deflator is because
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karaoke machine | karaoke machine | CDs | CDs | |
---|---|---|---|---|
year | quantity | Price | Quantity | Price |
2013 | 20 | $50 | 100 | $15 |
2014 | 30 | $90 | 150 | $20 |
a. Calculate CPI and compute the inflation rate of CPI. Use 2013 as the base year, and fix the basket at 1 karaoke machines and 3 CDs.
b. Calculate GDP deflator and compute the inflation rate using GDP deflator. Also use 2013 as the base year.
c. Is the inflation rate in 2014 the same using the two methods? Explain why or why not.