The Korean manufacturing output per hour index is given as follows for years 200

Question

The Korean manufacturing output per hour index is given as follows for years 2005 to 2009 as follows:

Year

Index

A. For each year from 2005 to 2009, determine the rate of increase in Korean manufacturing output per hour to two decimal places.

B. Since this index, like inflation, is compounded from period to period (e.g., year to year), estimate the overall annual rate of increase in Korean manufacturing output per hour from 2005 to 2009

Year

Index

2005 203.6 2006 205.1 2007 206.4 2008 210.9 2009 215.4

Explanation / Answer

(A)

(B) If overall annual rate of increase be R%, then

203.6 x (1 + R)4 = 215.4

(1 + R)4 = 215.4 / 203.6

(1 + R)4 = 1.0580

Taking 4th root on each side,

1 + R = 1.0142

R = 0.0142

R = 1.42%

Year Index Change in Index % Change in Index 2005 203.6 2006 205.1 1.5 0.74% 2007 206.4 1.3 0.63% 2008 210.9 4.5 2.18% 2009 215.4 4.5 2.13%

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