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Textbook_Solutions_chpt2

# 35500 2900029000 224 224 c deflator in

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Unformatted text preview: 24 = 22.4% c. Deflator in 2005=\$25,000/\$29,000=.86 Deflator in 2006=\$40,000/\$35,500=1.13 Inflation = (1.13 -.86)/.86 = .31 = 31%. d. 7. a. c. 6. The answers measure real GDP growth in different units. Neither answer is incorrect, just as measurement in inches is not more or less correct than measurement in centimeters. b. 5. 2005 real (2006) GDP: 10(\$3,000)+4(\$500)+1,000(\$1)=\$33,000 2006 real (2006) GDP: \$40,000. Real (2006) GDP has increased by 21.2%. Yes, see appendix for further discussion. a. Usual output growth is positive as population grows and output per worker grows. The unemployment rate rises more in a year when output growth is -2%. The unemployment rate at which the rate of inflation does not change is about 6%, considerably larger than zero. The slope does not tell us much about whether one economy is better than another. A slope of 0.8 simply says that, on average, inflation falls more with a given increase in the unemployment rate. b. c. d. Dig Deeper 8. a. The quality of...
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