Nominal personal consumption expenditures in Canada were $172.4 billion in 1980 and rose to $399.3 billion in 1990.The implicit price deflator for personal consumption expenditures is 67 for 1980 and 118.6 for 1990,where 1986 is the base year.Calculate the percent change in real personal consumption expenditures (rounded to the nearest percentage point)in the decade.
A)31%
B)61%
C)114%
D)133%

Question

Quizplus · Accepted Answer

The correct answer is A.The percent change in real personal consumption expenditures is calculated as follows:(Real PCE in 1990 - Real PCE in 1980) / Real PCE in 1980 * 100Real PCE in 1980 = Nominal PCE in 1980 / Implicit price deflator in 1980 * 100= 172.4 / 67 * 100= 257.4Real PCE in 1990 = Nominal PCE in 1990 / Implicit price deflator in 1990 * 100= 399.3 / 118.6 * 100= 336.5Percent change in real personal consumption expenditures = (336.5 - 257.4) / 257.4 * 100= 30.7%Therefore, the percent change in real personal consumption expenditures in the decade is 31%.

Nominal Personal Consumption Expenditures in Canada Were $172