Because there isn't one single measure of inflation, the government and researchers use a variety of methods to get the most balanced picture of how prices fluctuate in the economy. Two of the most commonly used price indexes are the consumer price index (CPI) and the GDP deflator. The GDP deflator for this year is calculated by dividing the using by the using and multiplying by 100. However, the CPI refilects only the prices of all goods and services Indicate whether each scenario will affect the GDP deflator or the CPI for the United States. Check all that apply. Shows up in the... GDP Scenario Deflator CPI A decrease in the price of a Treewood Equipment feller buncher, which is a commercial forestry machine made in the U.S.

Which goods are supposed to be included in the CPI? Group of answer choices All goods and services that typical consumers buy. All goods and services produced in the economy. All goods and services in the consumption component (C) of the GDP. All the goods, but not the services, in the consumption component (C) of the GDP.

Here are some recent data on the US consumer price index:  Year  CPI  Year  CPI  Year  CPI  2016  240.0  2011  224.9  2006  201.6  2015  237.0  2010  218.1  2005  195.3  2014  236.7  2009  214.5  2004  188.9  2013  233.0  2008  215.3  2003  184.0  2012  229.6  2007  207.3  2002  179.9    Compute the inflation rate of each year 2003-2016 and determine which were years of inflation. In which years did deflation occur? In which years did disinflation occur? Was there hyperinflation in any year?

The monthly market basket for consumers consists of​ pizza, t-shirts, and rent.     The table below shows market basket quantities and prices for the base year​ (Year 1) and in the following year.     Product Base Year​ (Year 1) Quantity Price in the Base Year Price in Year 2 Pizza 25 ​$2.00 ​$2.50 ​T-Shirts 4 ​$10.00 ​$9.00 Rent 1 ​$450.00 ​$495.00   In Year​ 1, the CPI for the economy is nothing. ​(Round both answers to one decimal place.​) In Year​ 2, the CPI for this economy is nothing.

Would excluding certain goods and services from CPI be beneficial for policymakers?

Use the following table to answer the question. The table shows the prices and the quantities consumed in Vegetarian Country. Suppose the base year is 2020. Also, suppose that 2020 is the year the typical consumption basket was determined, so the quantities consumed in 2020 are the only quantities needed to calculate the CPI in each year. Year Price of Carrots Quantity of Carrots Price of Celery Quantity of Celery 2020 $2.00 100 $1.00 100 2021   2.50   90   0.90 120 2022   2.75 105   1.00 130 What are the values of the CPI in 2020, 2021, and 2022, respectively?   a. 2020: 100; 2021: 111; 2022: 139.6     b. 2020: 100; 2021: 109.2; 2022: 116     c. 2020: 100; 2021: 113.3; 2022: 125     d. 2020: 83.5; 2021: 94.2; 2022: 100     e. None of the answer choices are correct.

In each of the following cases, explain clearly how the CPI might misrepresent changes in consumer prices (Commodity substitution bias, Introduction of new goods, or Un-measured quality changes). In each case, speculate as to whether CPI overstates or understates consumer expenses. (a) By 1990, expensive personal computers became a common expenditure in consumer baskets. However, some governments were still calculating the consumer’s basket using a 1975 survey. (b) Between 2007 and 2015, there were significant improvements in smartphones. (c) Compared to 1970, households in 2015 took more vacations. (d) Food quality has deteriorated over time, even as consumers purchase the same amount.

Question 1: In an economy, there are only two goods (Cars and cycles) produced. The data for last three years is given in the below table. Calculate the nominal and real GDP of three years and then find the GDP deflator for all the three years. Find year on year (YoY) inflation for 2018 and 2019. Note: the base year for this economy is given as 2017.   year Price of Car              (AED) Number of Car Price of cycle (AED) Number of cycle 2017 1000 10 200 900 2018 1200 15 210 1000 2019 1500 25 250 1500       Question 2: Explain the role of fiscal and monetary policy in an economy facing a recession. Use appropriate graph to justify your answer

The following table gives nominal and real GDP for an economy for two years. Based on the table, in Year 2, the value of the GDP deflator is Year 1 1430.0 1,300 Nominal GDP Real GDP (Round your answer to one decimal place.) The inflation rate between Year 1 and Year 2 is %. (Round your answer to one decimal place.) Year 2 1820.0 1560.0

Define consumer price index And tell why it is important to the economy.