Secure https//onq queensuca content/e ced/173407-ECONT10B/17-112-41pdfou 173407

Question

Secure https//onq queensuca content/e ced/173407-ECONT10B/17-112-41pdfou 173407 (a) Calculate the annual percentage growth rate in real GDP for 2011-12 through 2015-16. Can you identify a recession and recovery in the data? [6] data? [6] Calculate the growth rate in GDP per worker on a yearly basis. [4] (b) Calculate the unemployment rate for each year. Can you identify a recession and recovery in this (e) Calculate real GDP per worker (a measure of productivity) for cach ycear to the nearest dollar. A4-11. Th e table below shows the average annual consumption bundle and prices in 2012 and 2013 Streaming Movies Popocorn 2012 (quantity, price/unit) 10000 hrs, $1.00/hr) (5000 bags, $2.00/bag) 2013 (quantity, price/unit) (12000 hrs, $0.95/hr) (4000 bags, $2.20/bag) What is the percentage change in the price of each good? Calculate the consumer price index (CPI) for 2012 and 2013 using 2012 as the base year. What is the inflation rate in the CPI? [6] Are all consumers equally affected by the change in the "cost of living" (the CPI)? Explain. [3] What does the change in quantities in 2013 tell you about whether the CPI might overstate or understate the effect of price changes on the "cost of living"? [3] (a) (b) (c) The material in this assignment is copyrighted and is for the sole use of students registered in Economics 110, 111 and 112. The material in this assignment may be downloaded for a registered student's personal use, but shall not be distributed or disseminated to anyone other than students registered in Economics 110 111 and 112. Failure to abide by these conditions is a breach of copyright, and may also constitute a breach

Explanation / Answer

Answer for a)

% Price change for Movies=(0.95-1)/0.95=0.05/0.95=-5.26%

% Price change for Popcorn=(2.2-2)/2=10%

CPI for year 2012=Cost of Basket in year 2012/Cost of Basket in base year.....(base Year=2013)

CPI 2012=(10000*1+5000*2)/(10000*1+5000*2)=1

CPI 2013=(12000*0.95+4000*2.2)/(10000*1+5000*2)=(11400+8800)/20000=20200/20000=1.01

Inflation rate =CPIt-CPI(t-1)/CPI(t-1)=1.01-1/1=1%

Answer for b)

Consumers who are consuming more of movies have benefited from decrease in movie ticket prices where as Popcorn consumers have lowered their consumption due to increase in price per bag

Answer for c)

CPI generally overstates inflation because of the biases such as Substitutuion Bias as when price of one of the goods and services increase in the basket people start consuming less of it and substitute this expensive good with susbtitutes hence price impact on consumer budget may not be observed directly.

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