Rec03_sol

60500160 35360 2009 350120060700180 42500 3501200

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Unformatted text preview: ach year, using 2009 as the base year: Nominal GDP Real GDP (Use 2009 Prices) 2008 ($500)*(100) + ($0.80)*(500) + ($0.50)*(60) = $50,430 ($350)*(100) + ($0.60)*(500) + ($1)*(60) = $35,360 2009 ($350)*(120) + ($0.60)*(700) + ($1)*(80) = $42,500 ($350)*(120) + ($0.60)*(700) + ($1)*(80) = $42,500 2010 ($550)*(145) + ($1)*(1,000) + ($3)*(100) = $81,050 ($350)*(145) + ($0.60)*(1,000) + ($1)*(100) = $51,450 Next, calculate the GDP Deflator for each year using: GDP Deflator = (Nominal GDP / Real GDP)*100 GDP Deflator 2008 ($50,430 / $35,360) * 100 = 142.6 2009 ($42,500 / $42,500) * 100 = 100 2010 ($81,050 / $51,450) * 100 = 157.5 Finally, calculate inflation for each year using the values for GDP Deflator in the growth formula: [(new – old) / old] * 100% Inflation for 2008 cannot be calculated, and any answer similar to that for the year 2008 is acceptable. However, INFLATION IS NOT 0% IN 2008. Inflation Rate 2008 N/A, Not available, Cannot be calculated, etc. 2009 [(100 – 142.6) / 142.6] * 100% = ‐ 29.9% 2010 [(157.5 – 100) / 100] * 100% = 57.5% b) Because industrial tractors are not consumed by the typical customer, it will not be included in CPI calculations. First, calculate CPI for each year, using 2009 as the base year: Cost of Basket CPI 2008 (2*$0.80) + (2*$0.50) + (2*$0.50) = ($3.60/$4.40) * 100 = 81.8 $3.60 2009 (2*$0.60) + (2*$0.60) + (2*$1....
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