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Econ 3140
Fall 2009
Problem Set 3
Answer Key
1. Calculating chainweighted indexes is not too hard and you can use the computer
bicycle example in Table 2.4 to illustrate how to do so, as suggested in Box 2.2.
year 1 output at year 1 prices:
L
1
= $46
;
000
; the Laspeyres quantity index of year 2
output is
L
2
= $62
;
000
.
1 output at year 2 prices:
P
1
= $51
;
000
; the Paasche quantity index of year 2 output
is
P
2
= $66
;
000
. (These amounts are all calculated in Table 2.4, they just are not
labeled this way.)
The chainweighted index is just the geometric mean of the Laspeyres and Paasche
indexes:
C
1
= (
L
1
P
1
)
1
2
= (46
;
000
51
;
000)
1
2
= $48
;
400
;
C
2
= (
L
2
P
2
)
1
2
= (62
;
000
66
;
000)
1
2
= $63
;
970
:
Note that the growth rate of real GDP in this case is
($63
;
970
±
$48
;
400)
=
$48
;
400 =
32
:
06%
, which is close to the average growth rate calculated by the Laspeyres (
34
:
8%
)
and Paasche (
29
:
4%
) indexes, which is
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This note was uploaded on 10/10/2009 for the course ECON 3140 at Cornell University (Engineering School).
 '07
 MBIEKOP
 Macroeconomics

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