Suppose that in 1994 the total output in a single-good economy was 10,000 buckets of chicken....

Suppose that in 1994 the total output in a single-good economy was 10,000 buckets of chicken. Also suppose that in 1994 each bucket of chicken was priced at $15. Finally, assume that in 2015 the price per bucket of chicken was $20 and that 22,000 buckets were produced.

In parts a-b, enter your answer rounded to 1 decimal place. In part c, enter your answers as a whole number.

A. What is the GDP price index for 1994, using 2015 as the base year?

B. By what percentage did the price level, as measured by this index, rise between 1994 and 2015?

C. What were the amounts of real GDP in 1994 and 2015?

In 1994, real GDP = $

In 2015, real GDP = $

Solutions

Expert Solution

Ans- Given that,

Output in 1994 = 10,000 buckets of chicken

Price in 1994 = $15

Output in 2015 = 22,000

Price in 2005 = $20(base year price)

Ans-a) GDP price index for year 1994,using 2015 as the base year

=Price of good in specific year/price of good in base year×100

=15/20×100=75

GDP price index for year 1994,using 2015 as the base year is 75.

Ans-b) Price level as measured by this index(above mentioned),rise between 1994 and 2015.

New price level is always 100.

Percentage change in Price level=new price level-original price level/price level in base year×100

=100-75/75×100=33.33

Ans-c) I am assuming 2015 is the base year because for this part nothing has given. I am taking 2015 as base year because in ths upper part(B) ,2015 is the base year.

Real GDP in 1994= quantity in 1994× base year price

= 10,000×20= $2,00,000

Real GDP in 2015=quantity in 2015×price in 2015(base year)

=22,000×20=$4,40,000

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Suppose a closed economy has a consumption-output ratio of 0.8. Total output is 1 Billion in...

Suppose a closed economy has a consumption-output ratio of 0.8. Total output is 1 Billion in 2018 and the capital stock equals 5 Billion. It's depreciation rate and population growth rate are both equal to 2%. What is true in 2019? income will have grown consumption will take an even larger share of output we do not have enough information to calculate changes from 2018 to 2019 the capital stock must be smaller than in 2018

Total product (TP) : Total quantity, or total output, of a particular good or services produced....

Total product (TP) : Total quantity, or total output, of a particular good or services produced. Marginal product (MP) : Extra output or added product associated with adding a unit of a variable resource, in this cas labor, to the production process Marginal product (MP) = Change in total output / change in labor input Average product (AP) is total output per unit of a resource employed. Question: How do these concepts relate to short and long run production strategies?

In the LM curve diagram, for a given total income/output in the economy, the demand for...

In the LM curve diagram, for a given total income/output in the economy, the demand for real money balances is higher than real money supply when the interest rate is: A. equal to the equilibrium interest rate. B. above the equilibrium interest rate. C. below the equilibrium interest rate. D. none of the above.

Assume that the economy starts at the 'natural rate of output'. Now suppose there is a...

Assume that the economy starts at the 'natural rate of output'. Now suppose there is a decline in net exports due to the global economic downturn caused by COVID-19. Using the AD-AS diagram to show the effects in the short run and the medium run on the output, employment. and the price level. show how expansionary fiscal policy may influence these equilibrium positions.

The Solow Model was originally conceived for a single-good, closed economy. In the ensuing decades, it...

The Solow Model was originally conceived for a single-good, closed economy. In the ensuing decades, it has been expanded to account for endogenous growth and free trade. We want to consider what kinds of phenomena such models should encompass. Imagine a small developing country initially with a closed economy, with income per capita well below that of advanced nations. The policymakers in this country are considering opening the country to trade. Consider this country’s initial steady state and growth, and...

5) Suppose a project is dependent on whether there is a good economy and whether a...

5) Suppose a project is dependent on whether there is a good economy and whether a com- petitor enters the market. If there is no competitor, the project will produce $50 million in a good economy and $15 million in a poor economy. If there is a competitor, the project will produce $30 million in a good economy and $10 million in a poor economy. The probability of a good economy is 60%, versus 40% for a poor economy; and...

Suppose that output (Y ) in an economy is given by the following aggregate production function:...

Suppose that output (Y ) in an economy is given by the following aggregate production function: Yt = Kt + Nt where Kt is capital and Nt is the population. Furthermore, assume that capital depreciates at rate δ and that savings is a constant proportion s of income. You may assume that δ > s. 1. Suppose that the population remains constant. Solve for the steady-state level of capital per worker. 2. Now suppose that the population grows at rate...

Suppose that output (Y ) in an economy is given by the following aggregate production function:...

III. Suppose the economy begins with output equal to its natural level. Then, there is a...

III. Suppose the economy begins with output equal to its natural level. Then, there is a reduction in income taxes. a. Using the AS-AD model, show the effects of a reduction in income taxes on the position of the AD, AS, IS, and LM curves in the short- and medium-run. b. What happens to output, the interest rate, and the price level in the medium run? What happens to consumption and investment in the medium run?

Suppose that the production function for output in an economy is given by Yt=Kt0.25N0.75 The number...

Suppose that the production function for output in an economy is given by Yt=Kt0.25N0.75 The number of workers, N, is constant. The saving rate is s, and the depreciation rate of physical capital is δ. a) Write down the equation showing the evolution of physical capital stock over time. Explain in words. b) Derive the steady state levels of capital per worker and output per worker in terms of the saving rate (s) and the depreciation rate (δ).

Subjects