Suppose an economy produces and consumes only two goods, houses and entertainment. The following table shows quantities consumed and prices for three years: Year 0 (the base year), Year 1, and Year 2.

a.Using the base year basket, compute the CPI for Year 1 and Year 2
b.Compute GDP deflator for Year 1 and Year 2
c.Compute inflation rates based on CPI and GDP deflator

Question

Suppose an economy produces and consumes only two goods, houses and entertainment. The following table shows quantities consumed and prices for three years: Year 0 (the base year), Year 1, and Year 2.
  
a.Using the base year basket, compute the CPI for Year 1 and Year 2
b.Compute GDP deflator for Year 1 and Year 2
c.Compute inflation rates based on CPI and GDP deflator

Quizplus · Accepted Answer

The Answer of Suppose an economy produces and consumes only two goods, houses and entertainment. The following table shows quantities consumed and prices for three years: Year 0 (the base year), Year 1, and Year 2.
  
a.Using the base year basket, compute the CPI for Year 1 and Year 2
b.Compute GDP deflator for Year 1 and Year 2
c.Compute inflation rates based on CPI and GDP deflator

Suppose an Economy Produces and Consumes Only Two Goods, Houses