Question

Question: Go to the website of Statistics Canada and find data on the consumer price index for Ontario. By how much has the index for each product group and also including all items risen over the years from 2015 to 2017? For which categories of spending have prices risen the most/the least from 2015 to 2017? How much is the percent price change for each category of spending from 2015 to 2017? Have any categories experienced price declines? Explain any of these facts, e.g., explain the reasons of CPI changes (from 2015 to 2017) for each category. Present the CPI data in a table over the years 2014 to 2018 for the province of Ontario.

Answer 1

The graph depicts that the GDP per labor hour has shifted upwards in year 2. The level of GDP per labor hour in year 2 is higher for all levels of capital per labor hour.

This suggests that the level of savings has increased in the economy. As shown in the graph below, suppose the level of savings rise from s1 in year 1 to s2 in year 2.

In year 1, the steady state was obtained at point A. As the savings curve shifts upwards, the new steady state is obtained at point B in year 2 at the level of capital per labor hour 40. At k=30 in year 1, GDP per labor hour increases to level 24 from 18 immediately, however, as savings is higher than depreciation now, the level of output keeps of rising till point B is obtained where s2 f(k) = (n+delta + g)k. Here, GDP per labor hour is 30 at the new steady state.