Question

Table 1: GDP Country X: 2017

	Cars	Meals
Price	20,000	10,000
Quant.	9	18

Table 2: GDP Country X: 2018

	Cars	Meals
Price	20,000	6,000
Quant.	20	40

1. You are interested in calculating real GDP growth in Country X. (Use Table 1 and 2 to answer the following.)

a. Calculate the Laspeyres Quantity Index (from 2017 to 2018)

b. Calculate the Paasche Quantity Index (from 2017 to 2018)

c. Calculate the Fisher Quantity Index (from 2017 to 2018)

2. You are interested in calculating real GDP growth in Country X. (Use Table 1 and 2 to answer the following.)

a. Calculate the Laspeyres Price Index (from 2017 to 2018)

b. Calculate the Paasche Price Index (from 2017 to 2018)

c. Calculate the Fisher Price Index (from 2017 to 2018)

Answer 1

Year 2017:

Price = P0

Quantity = Q0

Year 2018:

Price = P1

Quantity = Q1

Index number table

Items	P0	Q0	P1	Q1	Q0P0	Q0P1	Q1P0	Q1P1
C	20000	9	20000	20	9× 20000 = 180000	9×20000 = 180000	20×20000 = 400000	20×20000 = 400000
M	10000	18	6000	40	18× 10000 = 180000	18×6000 = 108000	40×10000 = 400000	40×6000 = 240000
Total					360,000	288,000	800,000	640,000

1.

a.

Laspeyre’s quantity index = (Total Q1P0 / Total Q0P0) × 100

                                            = (800,000 / 360,000) × 100

                                            = 222.22 (Answer)

b.

Paasche’s quantity index = (Total Q1P1 / Total Q0P1) × 100

                                         = (640,000 / 288,000) × 100

                                         = 222.22 (Answer)

c.

Fisher’s quantity index = Square root of (Laspeyre’s quantity index × Paasche’s quantity index)

                                       = Square root of (222.22 × 222.22)

                                       = 222.22 (Answer)

2.

a.

Laspeyre’s price index = (Total P1Q0 / Total P0Q0) × 100

                                            = (288,000 / 360,000) × 100

                                          = 80 (Answer)

b.

Paasche’s price index = (Total P1Q1 / Total P0Q1) × 100

                                         = (640,000 / 800,000) × 100

                                         = 80 (Answer)

c.

Fisher’s price index = Square root of (Laspeyre’s price index × Paasche’s price index)

                                       = Square root of (80 × 80)

                                       = 80 (Answer)