The table below shows the GDP deflator and the CPI over the past five years. By what percentage did prices change between years for each measure? Instructions: Enter your answers as percentages rounded to two decimal places. Change in GDP Year GDP deflator CPI Change in CPI deflator 2016 100 100 2017 105 104 2018 112 110 2019 123 113 2020 128 122 2016-2020

Use the concept of real and nominal GDP to compare the years 1980 (Nominal GDP was $2.863 Trillion) and 2017 (Nominal GDP was $19.49 Trillion). 1980 Consumer Price Index was 82.14 and 2017 Consumer Price Index was 246.6. The base year is 1982 - 1984 when the CPI would have been 100.

One criticism of the CPI is that the market basket used in the CPI may not reflect current spending priorities. Which of the following is an example of this?     Personal computers were less powerful in 1982-1984.     Cell phones are more commonly purchased today than in 1993-1995.     Using extreme couponing methods, a family can save hundreds of dollars a month.     Goods cost more in Alaska and Hawaii due to transportation costs.

Two countries, Country N in North America and Country S in South America, have the same CPI basket. Year 2000 is the CPI base year for both countries. In that year, the cost of CPI basket in Country N is $N100, and in country S is $s1000, where $N and $s are their respective currencies. Twenty years later, in 2020, the CPI in Country N rose to 240, and in Country S to 360. a) In the ideal world in which the purchasing power parity (PPP) holds true, what should be the nominal exchange between $s and $N in Year 2000 and in Year 2020. Show calculations and explain the change in nominal exchange rate. b) Suppose in reality, the nominal exchange rage between the two currencies is 18 $s per $N in Year 2020. First, explain why the nominal exchange rate differs from your calculation above. Second, calculate the real exchange rate between the two countries, and explain the meaning of your calculated result. c) During Year 2021, the growth of the real GDP in the two countries are, 0% in country…