Suppose that in 1984 the total output in a single-good economy was 12,000 bucket

Question

Suppose that in 1984 the total output in a single-good economy was 12,000 buckets of chicken and the price of each bucket of chicken was dollar 16. In 2005 the price per bucket of chicken was dollar 20 and 26,000 buckets were produced. Determine the GDP price index for 1984, using 2005 as the base year. Instructions: Enter your response as an index number rounded to one decimal place. GDP price index = By what percentage did the price level, as measured by this index, rise between 1984 and 2005? What were the amounts of real GDP in 1984 and 2005? % Real GDP in 1984 = dollar Real GDP in 2005 = dollar

Explanation / Answer

1) GDP price index for year 1984 (Year 2005 as base)= [(12,000x16)/26,000x20]x100 = 36.9

2) Percentage rise = {[[26,000x20/(26,000x16)]x100 - 100]/100}x100% = 25%

3) Real GDP in 1984 = $12,000x16=$192,000
Real GDP in 2005 = 26,000x16 = $416,000

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