There are a number of statistics computed to measure the price level, such as the GDP...

There are a number of statistics computed to measure the price level, such as the GDP deflator and the CPI. The choice of which of these measures to use depends in many cases on the specific question in which you are interested. For each of the following situations, state whether the CPI or GDP deflator is a more appropriate measure to use and explain why. 1. (5 pts) The government is interested in whether increases in defense spending are affecting the price level. 2. (5 pts)An economic consulting firm is investigating the impact on the aggregate price level of more computers and electronic technology used in production.

Expert Solution

1)In this question the most appropriate measure to use CPI. CPI is used as an economic indicator to know the price level changes in the economy basing on inflation , change in government policies, business investment etc. CPI is used to measure the prices changes in an economy as the change in annual percentage of CPI help us to calculate inflation rate in the economy which helps the government to change policies basing on inflation rate.

2)In the question the appropriate measure to use is GDP deflator. GDP deflator is used to find the ratio of Nominal GDP to Real GDP where it shows the inflation or deflation of any country from a specific base year. GDP deflator is used to measure all the goods and services produced in a country for a price level. GDP deflator shows the changes in the consumption and investment in an economy by the people which helps us to understand the impact on economy.

Rahul Sunny answered 2 years ago

(A) (B) (C) Price Level Real GDP Price Level Real GDP Price Level Real GDP 110...

(A) (B) (C) Price Level Real GDP Price Level Real GDP Price Level Real GDP 110 290 100 215 110 240 100 265 100 240 100 240 95 240 100 265 95 240 90 215 100 290 90 240 a. Which set of data illustrates aggregate supply in the immediate short-run in North Vaudeville? The data in (Click to select)CAB. Which set of data illustrates aggregate supply in the short run in North Vaudeville? The data in...

Which variables measure level of happiness? using Descriptive statistics and bivariate statistics.

1. Define GDP and the components of GDP. How is GDP computed? What is the difference...

1. Define GDP and the components of GDP. How is GDP computed? What is the difference between money GDP and real GDP? Why are we concerned about this difference? 2 . Discuss the following: The consumer drives the US economy? Explain. 3. What is inflation and how does it differ from deflation. How do we measure the inflation rate? 4. Why is a high inflation rate harmful?

Analyse the effect of the following on GDP and the price level: a) A decrease in...

Analyse the effect of the following on GDP and the price level: a) A decrease in taxes, while excess capacity exists in the economy. b) Technological advancements which when applied to secondary and tertiary sectors improve productivity and overall output levels. c) A fall in interest rates, when the economy is approaching the peak stage of the business cycle. d)An increase in the price of oil which is key input into the production process of the manufacturing sector which represents...

Price Level & inflation Definition of the Consumer Price Index and the GDP deflator Calculation of...

Price Level & inflation Definition of the Consumer Price Index and the GDP deflator Calculation of price index (e.g., CPI, GDP deflator) Calculation of inflation (Note: inflation is the rate of change in a price index from one year to another) Limitation of the CPI (e.g., commodity substitution bias, quality bias, new goods bias, outlet substitution bias)

The price level will increase while real GDP decreases when:

The price level will increase while real GDP decreases when: aggregate demand decreases/shifts to the left short-run aggregate supply decreases/shifts to the left short-run aggregate supply increases/shifts to the right aggregate demand increases/shifts to the right

Potential GDP is 24.3 mln and actual GDP is 24.1 mln. Price level is 98. 1....

Potential GDP is 24.3 mln and actual GDP is 24.1 mln. Price level is 98. 1. What phase of business cycle takes place in the short run (Expansion or Recession)? 2. Draw the graph for this short run economic situation and 3. Describe the problems (changes in macroeconomic variables: GDP, Unemployment and Price level) 4. Explain the appropriate monetary policy to bring the economy back to its long run Macroeconomic equilibrium. What tools would CB will use? 5. How will...

Consider the following table for the U.S. Year Potential Real GDP Real GDP Price Level Federal...

Consider the following table for the U.S. Year Potential Real GDP Real GDP Price Level Federal Funds Rate 2006 $15.3 trillion $15.3 trillion 90.1 5.0% 2007 $15.6 trillion $15.6 trillion 92.5 5.0% 2008 $15.9 trillion $15.6 trillion 94.3 1.9% 2009 $16.1 trillion $15.2 trillion 95.0 0.2% 2010 $16.3 trillion $15.6 trillion 96.1 0.2% 2011 $16.5 trillion $15.8 trillion 98.1 0.1% 2012 $16.7 trillion $16.2 trillion 100.0 0.1% 2013 $17.0 trillion $16.5 trillion 101.6 0.1% 2014 $17.3 trillion $16.9 trillion 103.6...

what will happen to price level and Real GDP in the long run if the money...

what will happen to price level and Real GDP in the long run if the money supply increases?

Velocity. a) The money supply is $600. The price level is 2 and Real GDP is...

Velocity. a) The money supply is $600. The price level is 2 and Real GDP is 900. What is velocity? b) The money supply grows 3%, velocity is growing 1%, real output is growing 2%. What is the inflation rate? Suppose that people are worried that future inflation will be very high, so that people don’t want to hold onto money since it will lose value, which makes velocity grow at a rate of 10%. If the money supply continues...

Question