Macroeconomics
13th Edition
ISBN: 9781337617390
Author: Roger A. Arnold
Publisher: Cengage Learning
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Chapter 6, Problem 3QP
To determine
The total dollar expenditure.
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Your first job after graduation is in the statistical office of the small country Exemplia, where most people are employed in olive groves and love eating olives. Based on the most important transactions in Exemplia summarised in below table, you are tasked with calculating the consumer price index with base year 2020.
2020
2021
Price
Quantity
Price
Quantity
Olives (domestic consumption)
2
2,000
2.20
2,100
Olives (export)
2
4,000
2.20
3,600
Potatoes imported
1
1,000
1
800
Government‘s purchase of pencils
0.50
10,000
1
6,000
Olive picking machines (imported)
100
10
110
10
Using basket from your answer to question (a), calculate the CPI for 2020 and 2021, and the inflation rate for 2021.
Your first job after graduation is in the statistical office of the small country Exemplia, where most people are employed in olive groves and love eating olives. Based on the most important transactions in Exemplia summarised in below table, you are tasked with calculating the consumer price index with base year 2020. 2020 2021 Price Quantity Price Quantity Olives (domestic consumption) 2 2,000 2.20 2,100 Olives (export) 2 4,000 2.20 3,600 Potatoes imported 1 1,000 1 800 Government‘s purchase of pencils 0.50 10,000 1 6,000 Olive picking machines (imported) 100 10 110 10 a) Determine a suitable basket. b) Using basket from your answer to question (a), calculate the CPI for 2020 and 2021, and the inflation rate for 2021. c) Briefly discuss the most important differences between the calculation of the CPI and the GDP deflator and their consequences.
A small nation of 10 people idolizes the TV show The Voice. All they produce and consume are karaoke machines and CDs, in the following amounts: Karaoke Machines CDs Quantity Price Quantity Price (Dollars) (Dollars) 2020 10 20 50 13 2021 15 30 60 15 Using a method similar to that used to calculate the consumer price index, the percentage change in the overall price level is . (Note: Use 2020 as the base year, and fix the basket at 1 karaoke machine and 5.
Chapter 6 Solutions
Macroeconomics
Ch. 6.1 - Prob. 1STCh. 6.1 - Prob. 2STCh. 6.1 - In year 1, your annual income is 45,000 and the...Ch. 6.2 - Prob. 1STCh. 6.2 - Prob. 2STCh. 6 - Prob. 1QPCh. 6 - Prob. 2QPCh. 6 - Prob. 3QPCh. 6 - Prob. 4QPCh. 6 - Prob. 5QP
Ch. 6 - Prob. 6QPCh. 6 - Prob. 7QPCh. 6 - Prob. 8QPCh. 6 - Prob. 9QPCh. 6 - Prob. 10QPCh. 6 - Prob. 11QPCh. 6 - Prob. 12QPCh. 6 - Prob. 13QPCh. 6 - Prob. 14QPCh. 6 - Prob. 1WNGCh. 6 - Prob. 2WNGCh. 6 - Prob. 3WNGCh. 6 - Prob. 4WNGCh. 6 - Prob. 5WNGCh. 6 - Prob. 6WNGCh. 6 - Prob. 7WNGCh. 6 - Prob. 8WNGCh. 6 - Prob. 9WNGCh. 6 - Prob. 10WNG
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- Your first job after graduation is in the statistical office of the small country Exemplia, where most people are employed in olive groves and love eating olives. Based on the most important transactions in Exemplia summarised in below table, you are tasked with calculating the consumer price index with base year 2020. 2020 2021 Price Quantity Price Quantity Olives (domestic consumption) 2 2,000 2.20 2,100 Olives (export) 2 4,000 2.20 3,600 Potatoes imported 1 1,000 1 800 Government‘s purchase of pencils 0.50 10,000 1 6,000 Olive picking machines (imported) 100 10 110 10 Determine a suitable basket.arrow_forwardA small nation of 10 people idolizes the TV show The Voice. All they produce and consume are karaoke machines and CDs, in the following amounts: Karaoke Machines CDs Quantity Price Quantity Price (Dollars) (Dollars) 2020 10 40 30 10 2021 12 60 50 12 Using a method similar to that used to calculate the consumer price index, the percentage change in the overall price level is . (Note: Use 2020 as the base year, and fix the basket at 1 karaoke machine and 3 CDs.) Using a method similar to that used to calculate the GDP deflator, the percentage change of the overall price level is . (Note: Again, use 2020 as the base year.) Which of the following statements is correct? 1.The GDP deflator holds the basket of goods and services constant. 2.The inflation rate in 2021 is not the same using the two methods. 3. The CPI allows the basket of goods and services to change.arrow_forwardA small nation of 10 people idolizes the TV show The Voice. All they produce and consume are karaoke machines and CDs, in the following amounts: Karaoke Machines CDs Quantity Price Quantity Price (Dollars) (Dollars) 2020 20 50 60 5 2021 21 70 80 6 Using a method similar to that used to calculate the consumer price index, the percentage change in the overall price level is . (Note: Use 2020 as the base year, and fix the basket at 2 karaoke machines and 6 CDs.) Using a method similar to that used to calculate the GDP deflator, the percentage change of the overall price level is . (Note: Again, use 2020 as the base year.) Which of the following statements is correct? Check all that apply. The CPI allows the basket of goods and services to change. The GDP deflator allows the basket of goods and services to change. The inflation rate in 2021 is not the same using the two methods.arrow_forward
- A small nation of 10 people idolizes the TV show The Voice. All they produce and consume are karaoke machines and CDs, in the following amounts: Karaoke Machines CDs Quantity Price Quantity Price (Dollars) (Dollars) 2020 20 50 60 5 2021 21 70 80 6 Using a method similar to that used to calculate the consumer price index, the percentage change in the overall price level is . (Note: Use 2020 as the base year, and fix the basket at 2 karaoke machines and 6 CDs.) Using a method similar to that used to calculate the GDP deflator, the percentage change of the overall price level is . (Note: Again, use 2020 as the base year.) Which of the following statements is correct? Check all that apply. The GDP deflator holds the basket of goods and services constant. The CPI holds the basket of goods and services constant. The inflation rate in 2021 is the same using the two methods.arrow_forwardBritney is a baseball fan and attends several games per season. Her expenses per season are listed in the table below: Year 2 Year 1 5 Baseball $500$560 Tickets Jersey $120 $150 $150 $160 Food Transport $60 S$70 Assuming that year 1 is the base year, calculate the price index for year 1 and for year 2. 100, 113 100, 88 88, 113 88, 100arrow_forwardDefine the term Consumer Price Index?arrow_forward
- The table below shows the total expenditure on a basket of goods and services. Use this information to calculate index numbers for the cost of a basket of goods and services in each period. Assume Period 3 is the base year. Round to one decimal place. Provide your answer below: Period 1 Period 2 Period 3 Period 4 Total Expenditure $3, 100 $3,350 $3,400 $3,450 Period 1 Period 2= Period 3 Period 4 Index Numberarrow_forwardHow is the producer price index related to the consumer price index?arrow_forwardThe following table shows a hypothetical situation for an economy that uses for an average household of four people a basket of only three products to calculate the consumer price index (CPI) between the years 2015 and 2018. Product Product A 20 Product B Product C 98 100 131 133 50 2015 4 Quantity Price $50 $52 $56 $100 55 $105 61 $113 $1,200 5 $1,210 5 $1,230 If the base year is 2015, what is the value of the consumer price index in 2015? (round to the closest integer) a 22 2016 P Q 23 2017 P Q $55 $111 $1,225 22 62 2018 5 Parrow_forward
- Is the consumer price index a good measure of the general price increase of consumers? How?arrow_forwardThe table identifies the prices (P1 and P2) of three goods in two different years, and it shows the market basket that is used to calculate the consumer price index. The base year is year 1. Good P1 P2 Basket Milk $4 (gallons) $4.20 6 Chicken $5 (pounds) $5.50 |12 Carrots $2 |(bags) $2.40 4 Enter numbers in each blank, rounded to two decimal places as necessary. The value of the CPI in year 1 is The value of the CPI in year 2 is The inflation rate is equal to %.arrow_forwardSuppose the only goods produced and consumed in an economy are food and clothing. The following table shows data on the quantities and prices of output in different years: fill in the table below- (2001 is the base year) Year Food (quantity) Price of Food Clothing (quantity) Price of clothing Nominal GDP Real GDP GDP Deflator Inflation 2000 200 $4 400 $6 2001 300 $5 500 $8arrow_forward
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