Suppose that in 1984 the total output in a single-good economy was 10,000 bucket

Question

Suppose that in 1984 the total output in a single-good economy was 10,000 buckets of chicken and the price of each bucket of chicken was $16. In 2005 the price per bucket of chicken was $20 and 22,000 buckets were produced.

Determine the GDP price index for 1984, using 2005 as the base year.

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 = $

Real GDP in 2005 = $

Explanation / Answer

Q1984 = 10000, P1984=$16, Q2005=22000, P2005=$20

Price index = 16*100/20 = 80%

There is 20 % increase in price level.

Real GDP1984= Q1984 * P2005 = 10000*20 = $200,000

Real GDP2005= Q2005 * P2005 = 22000*20 = $440,000

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