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Chapter 8: Q.15 (page 164)

In the table for Problem 8-14, if 2020 is the base year, what is the price index for 2019? (Round decimal fractions to the nearest tenth.)

Short Answer

Expert verified

If 2020 is the base year, the price index for2019is62451.4420.

Step by step solution

01

Introduction

Changes in relative prices are measured in price index.

Nominal GDP is a measurement of economic output in a country that takes current prices into account.

02

Explanation

The base year is 2020

Calculating the real GDP for the year 2019

⇒(800×10)+(11×3000)+(150×500)+(10000×2)=240331520000

we multiply quantity into the current year price to find nominal GDP.

Calculating the nominal GDP for the year 2019

⇒(1000×10)+(6×3000)+(100×500)+(1×10000)
03

Step 3

Finding the price index for the year 2019 , we have,

⇒NominalGDPfortheyear2019RealGDPfortheyear2019×100=150090500010000240331520000×100=62451.4420

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Most popular questions from this chapter

Consider the following hypothetical data for the U.S. economy in 2020(all amounts are in trillions of dollars).

a. Based on the data, what is GDP? NDP? NI?

b. Suppose that in 2021, exports fall to \(2.3trillion, imports rise to \)2.85trillion, and gross private domestic investment falls to $3.25trillion. What will GDP be in 2021, assuming that other values do not change between 2020and 2021?

In the first stage of manufacturing each final unit of a product, a firm purchases a key input at a price of \(4 per unit. The firm then pays a wage rate of \)3 for the time that labor is exerted, combining an additional \(2 of inputs for each final unit of output produced. The firm sells every unit of the product for \)10. What is the contribution of each unit of output to GDP in the current year?

Consider the diagram below, and answer the following questions.

a. What is the base year? Explain.

b. Has this country experienced inflation or deflation since the base year? How can you tell?

Why do you suppose that many economists worry that including the degree of depletion or pollution of natural resources could make the value of GDP harder to interpret?

Why might current intangible investments in recorded music by Katie Perry or Rihanna be harder to measure with greater precision today than long-past investments in the recorded music of, say, Elvis Presley in the 1960 s or Elton John in the 1970s? (Hint: Is it easier to project forward or to look back at past data?)
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