Growth Rate of GDP = g_GDP = [changeY/Y] = [Y_Year2 - Y_Year1/Y_Year1] Using the

Question

Growth Rate of GDP = g_GDP = [changeY/Y] = [Y_Year2 - Y_Year1/Y_Year1] Using the data below calculate the growth rate for any four regions across with both sets of dates: period 1 from 1982 to 1950 and period 2 from 1950 to 2009 Also calculate the average growth rate of the period. Use the formula: g_Y = 1/T [ln(Y_r)-ln(Y_0)] Write the equation(s) for a price index. What is the consumer price index (CPI) and how is it constructed? Construct the CPI and provide the inflation rate for the example data:

Explanation / Answer

1.Calculation of growth rate for 1820-1950 and 1950 -2009 :

                   N.America : period 1 = (9463-1253)/1253

                                                     = 6.55

                       Average growth rate = 6.55*100/130

                          = 5.038%      

                                       2007 income 31000 but we need to calculate growth rate for 1950-2009,we have to calculate estimated 2009 income. Given current annual growth rate is 2% in table.

                              2009 income will be =32252.4 (31000*102%*102%)

                                               Period 2 = (32252.4-9463)/9463

                                                            = 2.408

                             Average growth rate = 2.408*100/59

                                                           = 4.08%

                  Japan :   Growth rate for period 1 =1921-660/660 =1.91

                                   Average growth rate = 1.91*100/130 =1.47%

                               2009 income will be =24711.84 (2250*104.8%*104.8%)

                                                        Period 2 =(24712 - 1921)/1921

                                                                     = 11.86

                                       Average growth rate = 11.86*100/59 =20.10%

                  Europe :   growth rate for period 1 =2111-683/683 = 2.09

                                   Average growth rate =2.09*100/130 =1.607%

                                    2009 income = 7938 (7600*102.2%*102.2%)

                           growth rate period 2 = 7938-2111/2111 = 2.76

                           Average growth rate = 2.76*100/59 =4.677%

                Africa :        Growth rate for period 1 =1307-420 /420   =2.11

                                      Average growth rate = 2.11*100/130 =1.623%

                                    2009 income   = 1737.60 (170*101.1%*101.1%)

                            Growth rate for period 2       = 1738-1307/1307 =0.33

          Average growth rate =0.33*100/59 =.559%

2. Equation for price index :

   price index = Curren price/base price *100

3.What is consumer price index and it's construction :

it is a measure of average change over time in the price paid by urban households for a set of consumer goods and services.the expenditure of items classified in to some number of categories that are arrnalged in to some number of groups.included items are user fees such as water and sewer service and sales and excise taxes paid by the consumer are also included.income taxed and investment items (like stocks,bonds,lic)are excluded. There are many ways to construct a consumer price index ex: by taking weights for an item which is derived from reported expenditures on that item estimated by the consumber expenditure survey department.

4.Construction of CPI and Inflation rate for given data:

                        =Pt.i*Qoi/Poi*Qoi

        Inflation rate for america period 2 =818.83%

                                  

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