Question: f) Explain why the levels of the CPI and implicit GDP deflator sometimes move in different directions. g) Compute the rate of inflation of the

 f) Explain why the levels of the CPI and implicit GDP

f) Explain why the levels of the CPI and implicit GDP deflator sometimes move in different directions. g) Compute the rate of inflation of the CPI for each year. (Define the rate of inflation for year t to be the percentage change in the price index from year t-1 to year t.) Do the same for the rate of inflation of the GDP deflator. Explain any differences that you observe between the two measures of inflation. h) Compute the (nominal) dollar value of exports and imports for each year. Also compute the trade surplus (or deficit) for each year. i) For years in which there is a trade deficit, explain how this country finances its "extra" imports. For years in which there is a trade surplus, explain what this country does with its "extra" export earnings

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