The following hypothetical economy has produced the following quantity of gauges and potatoes, with the price...

  

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The following hypothetical economy has produced the following quantity of gauges and potatoes, with the price of each listed in dollar terms: 2001 2002 Good Gauges Quantity Quantity 10000 Price Price 8000 $4 $3 Potatoes 6000 $8 5000 $14 Using a fixed-weight price index, with 2001 as the base year, what are the price indexes for 2001 and 2002? What is the inflation rate using this index? What is the percent change in real output using this index? a) b) Using a variable-weight price index, with 2001 as the base year, what are the price indexes for 2001 and 2002. What is the inflation rate using this index? What is the percent change in real output using this index? When the inflation rate measured by the Consumer Price Index goes up by 3%, the GDP deflator will increase by more than 3% and as a result the cost of living for Ms. Jones will rise by more than 3%. Explain whether this statement is true, false or uncertain c) The following hypothetical economy has produced the following quantity of gauges and potatoes, with the price of each listed in dollar terms: 2001 2002 Good Gauges Quantity Quantity 10000 Price Price 8000 $4 $3 Potatoes 6000 $8 5000 $14 Using a fixed-weight price index, with 2001 as the base year, what are the price indexes for 2001 and 2002? What is the inflation rate using this index? What is the percent change in real output using this index? a) b) Using a variable-weight price index, with 2001 as the base year, what are the price indexes for 2001 and 2002. What is the inflation rate using this index? What is the percent change in real output using this index? When the inflation rate measured by the Consumer Price Index goes up by 3%, the GDP deflator will increase by more than 3% and as a result the cost of living for Ms. Jones will rise by more than 3%. Explain whether this statement is true, false or uncertain c)

Answer rating: 100% (QA)

Solution a Using fixed weight price index with base year as 2001 Market Basket value for 2001 80004 ... View the full answer