# HW7 - Homework 7 ECON 010 Fall 2011 Question 1 Calculating...

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Homework 7 ECON 010, Fall 2011 Question 1: Calculating GDP in a Simple Economy a. What is the Gross Domestic Product (GDP)? b. What is the diﬀerence between nominal GDP and real GDP? c. Is GDP a stock value or a ﬂow value? Give examples of each. d. Below are some data from the land of milk and honey. Year Price Quantity Price Quantity Price of Quantity of Milk of Milk of Honey of Honey Haircuts Haircuts 2008 \$ 1 100 quarts \$ 2 50 quarts \$ 10 30 2009 \$ 1 200 \$ 2 100 \$ 10 60 2010 \$ 2 200 \$ 4 100 \$ 20 60 1. Calculate the nominal GDP in each year. 2. Calculate the real GDP in each year using 2008 as a base year. 3. Why did the nominal GDP increase from 2008 to 2009? Why did the nominal GDP increase from 2009 to 2010? Question 2: CPI and Inﬂation a. What is Inﬂation? How do we measure inﬂation? b. What is the Consumer Price Index (CPI)? c. A typical family on Sandy Island consumes only juice and cloth. Last year, which was the base year, the family spent \$40 on juice and \$25 on cloth. In the base year, juice was \$4 a bottle and cloth

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## This note was uploaded on 04/04/2012 for the course ECON 010 taught by Professor Stein during the Fall '07 term at UPenn.

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HW7 - Homework 7 ECON 010 Fall 2011 Question 1 Calculating...

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