Homework Week 1

# Homework Week 1 - Problem 1 Consider the imaginary economy...

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Problem 1 Consider the imaginary economy Gourmetia which produces only caviar, champagne and oysters. The information on the amounts produces and the prices are given for the years 1995 and 2005. 1995 2005 goods Prices per unit output Prices per unit output Caviar (oz) \$ 5.00 10 \$ 6.00 7 Champagne (bottels) \$ 20.00 10 \$ 25.00 13 Oysters \$ 3.00 8 \$ 2.50 11 Compute for both years 1. nominal GDP 2. real GDP in constant 1995 prices (i.e. 1995 s the base year) 3. GDP deflator 4. The growth rate of real GDP and the GDP deflator between 1995 and 2005. 5. Use the idea of chaining in order to compute the real GDP for the year 2005 on the basis of 2005 prices directly from the real GDP of the year 2005 on the basis of 1995 prices. Use the price change in between to do this. Explain the method of chaining by your computation Problem 2 Compare the results for nominal GDP and real GDP in 2005 and discuss the reason why the results are exactly what they are!

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Problem 3 1. Compute the inflation rate between the year 1995 and the year 2005 for the
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## This note was uploaded on 01/30/2009 for the course ECON 342934 taught by Professor Staff during the Fall '08 term at UCSD.

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Homework Week 1 - Problem 1 Consider the imaginary economy...

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