Question: Refer to Exercise 14.11. Suppose the output quantities in 1970, measured in billions of units purchased, are as follows: Durable goods: 10.9 Nondurable goods: 14.02

Refer to Exercise 14.11. Suppose the output quantities in 1970, measured in billions of units purchased, are as follows:

Durable goods: 10.9
Nondurable goods: 14.02
Services: 42.6
a. Use the outputs to calculate the Laspeyres index from 1960 to 2015 (same increments as in Exercise 14.11) with 1970 as the base period.
b. Plot the simple composite index of Exercise 14.11 and the Laspeyres index of part a on the same graph. Comment on the differences between the two indexes.

Year Durables Nondurables Services 229 416 573 919 1970 1975 1980 1985 90 134 226 353 330 475 956 1,395 2,344 3,172 4,371 5,745 6,923 8,293 497 636 916 1990 1995 2000 2005 994 1,180 1,543 1,968 2,336 2,654 1,106 1,089 1,329 2010 2015

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a The find Laspeyres index we multiply the durable goods by 109 the nondurable goods by 1402 ... View full answer

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