Solve the questions below and please show working 1) The consumer price index (C

Question

Solve the questions below and please show working

1) The consumer price index (CPI) was 180 for 2002 when using 1983 as the base year (1983 = 100). Now suppose we switch and use 2002 as the base year (2002 = 100). What is the CPI for 1983 with the new base year?

(a) 18.0 (b) 55.6 (c) 80.0 (d) 111.2

2) In 2002 the GDP deflator for Old York was 300, and in 2004 it had risen to 330.75. Based on this information the annual average inflation rate for the two years was

(a) 5%. (b) 5.125%. (c) 10%. (d) 10.25%.

3) If nominal GDP for 2003 is $6400 billion and real GDP for 2004 is $6720 billion (in 2003 dollars), then the growth rate of real GDP is

(a) 0%. (b) 0.5%. (c) 5%. (d) 50%.

4) If the price index was 100 in 1990 and 120 in 2000, and nominal GDP was $360 billion in 1990 and $480 billion in 2000, then the value of 2000 GDP in terms of 1990 dollars would be

(a) $300 billion. (b) $384 billion. (c) $400 billion. (d) $424 billion.

5) In 2002, national saving was $1456 billion, investment was $1945 billion, and private saving was $1590 billion. How much was the current account balance?

(a) $489 billion (b) $221 billion (c) –$221 billion (d) –$489 billion

Explanation / Answer

(1) (b)

New CPI = (100 / 180) x 100 = 55.56

(2) (a)

If average annual inflation rate be R% per year, then

300 x (1 + R)2 = 330.75

(1 + R)2 = 330.75/300 = 1.1025

Taking square root,

1 + R = 1.05

R = 0.05 = 5%

(3) (c)

Real GDP equals nominal GDP in base year (2003). So,

Growth rate in real GDP = ($6720B / $6400B) - 1 = 1.05 - 1 = 0.05 = 5%

(4) (c)

Value of 2000 GDP in 1990 dollars = $480 billion x (100/120) = $400 billion

NOTE: As per Answering Policy, first 4 questions have been answered.

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.