# Problem 3 - c The production of goods and services...

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EC 11. Principles of Macroeconomics Jose U. Mora Problems for Chapters 10 and 11 Due on Thursday, Oct 25. Use table 1 below to answer questions 1 – 3. Table 1. The information in the table pertains to the country of Quiriquire. Year Nominal GDP GDP Deflator 2004 \$4000 100 2005 \$4100 105 2006 \$4200 110 1. From this information we can conclude that a. real GDP was higher in 2006 than in 2005, and real GDP was higher in 2005 than in 2004. b. real GDP was higher in 2005 than in 2004, and real GDP was higher in 2005 than in 2006. c. real GDP was higher in 2004 than in 2005, and real GDP was higher in 2005 than in 2006. d. real GDP was higher in 2004 than in 2006, and real GDP was higher in 2005 than in 2004. 2. Which of the following statements do we know to be correct? a. Total spending in Quiriquire increased throughout the period. b. Household spending in Quiriquire increased throughout the period.
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Unformatted text preview: c. The production of goods and services increased in Quiriquire throughout the period. d. All of the above are correct. 3. What is the inflation rate for 2006? Show your work. Use table 2 below to answer questions 4 - 6. Table 2 Year Price of pork Price of corn 2005 \$20 \$12 2006 \$25 \$18 4. Suppose the basket of goods in the CPI consisted of 3 units of pork and 4 units of corn. What is the consumer price index for 2006 if the base year is 2005? 5. Suppose the basket of goods in the CPI consisted of 3 units of pork and 4 units of corn. What is the inflation rate for 2006 if the base year is 2005? 6. Using your result from the previous questions, is the inflation rate for 2006 the same if you use 2006 as the base year? Show your work....
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