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21 Oct 2020

Calculate the CPI and inflation for 2012 using 2011 as the base year. 

The market bundle is 5 Oranges, 5 portions of bacon and 7 Drinks. Prices ($) are as follows

 

2010

2011

2012

Orange

2

4

5

Bacon

4

6

6

Drinks

1

1.5

1.9

 

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Macroeconomics
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Inflation
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Darryn D'Souza
Darryn D'SouzaLv10
21 Oct 2020

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Related questions

YEAR

P of Hot Dogs

Q of Hot Dogs

P of Hamburgers

Q of Hamburgers
2011 $1 100 $2 50
2012 (Base Year) $2 150 $3 100
2013 $3 200 $4 150

a. Calculate the CPI for 2011 and 2012. Using the CPI, calculate the rate of inflation between 2011 and 2012.

b. Calculate the GDP deflator for 2012 and 2013. Using the GDP deflator, calculate the rate of inflation between 2012 and 2013.

c. Recalculate the inflation rate between 2012 and 2013 using the CPI instead of the GDP deflator. In general, would the two methods yield the same inflation rate? Why?

4. Suppose the economy of Stockton produces four goods: strawberries, ice cream, sushi, andcoolers. However, consumers only purchase strawberries, ice cream, and sushi. Coolers are a final good, but are only used by ice cream trucks to store ice cream. The total production of all final goods is given in the table below: Year Strawberries Ice Cream Quantity Price ($ per unit) Quantity Price ($ per unit) 2010 8 $4 10 $2 2011 9 $5 14 $2 2012 10 $6 18 $3 Year Quantity Sushi Price ($ per unit) Coolers Quantity Price ($ per unit) 2010 12 $3 1 $12 2011 12 $3 2 $8 2012 15 $4 8 $2 (a) Using 2010 as the base year, calculate the value of the CPI in each year, and thencalculate the rate of inflation based on the CPI for all years (i.e., inflation rate from 2010 to 2011 and from 2011 to 2012). (b) Keeping in mind that the GDP deflator is a fixed-prices measure (fixed in the base year),calculate nominal GDP and real GDP for each year using 2010 as the base year. Using the expression for the GDP deflator, calculate the value of the GDP deflator in each year, then calculate the rate of inflation based on the GDP deflator for all years (i.e., inflation rate from 2010 to 2011 and from 2011 to 2012). (c) The following table gives the average nominal wage (in thousands) of workers in Stockton. In which year did they have the highest real wage?

Real versus nominal GDP

Consider a simple economy that produces two goods: apples and oranges. The following table shows the prices and quantities for the goods over a three-year period.

Year

Apples

 

Oranges

 
Price Quantity Price Quantity
(Dollars per apple) (Number of apples) (Dollars per orange) (Number of oranges)
2010 1 120 1 195
2011 2 130 4 195
2012 4 130 4 145

A. Use the information from the previous table to fill in the following table.

Year Nominal GDP Real GDP GDP Deflator
(Dollars) (Base year 2010, Dollars)
2010      
2011      
2012      

 

B. From 2011 to 2012, change in nominal GDP is __________, and real GDP is ________.

 

C. The inflation rate in 2012 was ____________.

 

D. Why is real GDP a more accurate measure of an economy's production than nominal GDP?

a. Real GDP does not include the value of intermediate goods and services, but nominal GDP does.

b. Real GDP includes the value of exports, but nominal GDP does not.

c. Real GDP is not influenced by price changes, but nominal GDP is.

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