10.00 points The table below shows the GDP deflator and the CPI I over the past

Question

10.00 points The table below shows the GDP deflator and the CPI I over the past five years. By what percentage did prices change between years for each measure? Instructions: Enter your answers as percentages rounded to one decimal place. Change in GDP Change in CP CPI 100 104 110 113 120 GDP deflator 112 123 127 References eBook & Resources Learning Objective: 08-04 Calculate the inflation rate by three methods and adjust nominal variables into real variables using a price index Section: Using Price Indexes Numeric Response DOLL

Explanation / Answer

(1) % Change in GDP Deflator:

2005-06: (105 / 100) - 1 = 1.05 - 1 = 0.05 = 5.0%

2006-07: (112 / 105) - 1 = 1.067 - 1 = 0.067 = 6.7%

2007-08: (123 / 112) - 1 = 1.098 - 1 = 0.098 = 9.8%

2008-09: (127 / 123) - 1 = 1.033 - 1 = 0.033 = 3.3%

2005-2009: (127 / 100) - 1 = 1.270 - 1 = 0.270 = 27.0%

(2) % Change in CPI:

2005-06: (104 / 100) - 1 = 1.04 - 1 = 0.04 = 4.0%

2006-07: (110 / 104) - 1 = 1.056 - 1 = 0.056 = 5.6%

2007-08: (113 / 110) - 1 = 1.027 - 1 = 0.027 = 2.7%

2008-09: (120 / 113) - 1 = 1.062 - 1 = 0.062 = 6.2%

2005-2009: (120 / 100) - 1 = 1.200 - 1 = 0.200 = 20.0%

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