1) a.If Real GDP = $200 billion and the price index= 200, Nominal GDP is $4 billion $400 billion $200 billion $2 billion Impossible to determine since the base year is not given. b. If your nominal income rises 4 percent and your real income falls 1 percent, by how much did the price level change? 5% decrease ¼ % increase 3% increase 3% decrease 5% increase c. An increase in the CPI from 200 to 225 would indicate an annual rate of measured inflation of 1.3% 12.5% 25% 200% 225%

3a. Suppose that the consumer price index was 100 on January 1st, 2000 and 110 on January 1st, 2001. Determine the inflation rate between the two dates. 3b. Ruben earned a salary of $50,000 in 2015 and $60,000 in 2018. The consumer price index was 150 in 2015 and 200 in 2018. What has happened to Ruben's nominal and real income from 2015 to 2018?

3. In a small community, breakfast is the most important meal of the day. Therefore, the only two goods that this community produces are coffee and scones in the following amounts: Year 2020 2021 Quantity 60 cups 90 cups Coffee Price $1.25 $1.45 Quantity 45 units 65 units Scones Price $2.10 $3.95 a) Calculate the inflation rate for 2021 using the GDP deflator method (assume that 2020 is the base year for real GDP calculations). Show your work. b) Calculate the inflation rate for 2021 using the CPI method (assume that 2020 is the base year for CPI calculations). Additionally, assume that the consumption basket for both years contains only 10 cups of coffee and 40 scones. Show your work. c) Compare the results of both inflation calculations and explain why they are similar or different based on the two methods and on the specific data used in this example.

3. In the country below, only four items are produced, and all of the four are part of the CPI basket. C. e. Items Webcams Surgical masks Disinfectant wipes Dumbbells a. What is the nominal GDP growth rate between 2019-2020, and between 2020-2021? b. Given only the information you have, would real GDP growth be positive or negative between 2020 and 2021. Explain your answer. What is the CPI in each year if the base year is 2019? Assume all four items have the same weight in the CPI basket equal to one unit each d. Using the CPI as the price index, what is the inflation rate between 2019 and 2020? And between 2020-2021? f. 2019 2020 2021 Quantity | Price | Quantity Price | Quantity | Price 10 $20 15 $25 14 $22 100 $1 120 $3 110 $2 100 $5 $8 110 $7 10 $40 $50 10 $45 120 10 Without any calculation, would using the GDP deflator instead of CPI in (d) result in a higher or lower inflation rate? Explain your answer. What is the GDP deflator, how is it measured, and why is it considered a…