Question 15 Legalization of marijuana in some states will a. increase GDP b. dec
ID: 1162553 • Letter: Q
Question
Question 15
Legalization of marijuana in some states will
a.
increase GDP
b.
decrease GDP
c.
have no effect on GDP
d.
none of the above
QUESTION 7
The country of Aruba produces only cakes and coffee. Quantities and prices of these goods for the last couple of years are shown below. The base year is 2012.
Year
Price of Cake
Quantity of Cake
Price of Coffee
Quantity of Coffee
2012
$ 4
100
$1.50
180
2013
$ 4
120
$ 2.00
200
2014
$ 5
150
$ 2.50
200
2015
$ 6
180
$ 3.50
240
This country’s inflation rate from 2014 to 2015 was
a.
20.0 %
b.
21.8 %
c.
38.9 %
d.
28.0 %
quesition 6
What are problems associated with Consumer Price Index? Explain them and provide example for each.
a.
increase GDP
b.
decrease GDP
c.
have no effect on GDP
d.
none of the above
Explanation / Answer
Question 15
a) Increase GDP. The states that have legalized marijuana have shown an increase in economic growth.
Question 6
CPI has the following drawbacks
1. New product bias. Since CPI takes into consideration only selected products, it ignores new product. If a new cell phone is introduced in the market, this is ignored.
2. Quality bias. Improvements in quality is ignored. Quality in TV viewing, for example, is ignored.
3. Substitution bias: If more efficient and cheaper goods are substituted, more efficient cars for example, this is ignored.
2012 2013 2014 2015 Market basket in 2012 $ Market basket in 2013 $ Market basket in 2014 $ Market basket in 2015 $ Item Quantity Price $ Quantity Price $ Quantity Price $ Quantity Price $ Market basket in base period (quantity in the base year and price in the base year) Market basket in current period (quantity in the base year and current year prices) Market basket in current period (quantity in the base year and current year prices) Market basket in current period (quantity in the base year and current year prices) Cake 100 4.00 120 4.00 150 5.00 180 6.00 400 400 500 600 Coffee 180 1.50 200 2.00 200 2.50 240 3.50 270 360 450 630 670 760 950 1230 Base year 2012 CPI formula (Base year basket quantity times current year prices)/Base year basket quantities times base year prices)100 CP in 2013=( Cost of the base year market basket in the current period/Cost of the base year market basket in the base period)x100 (760/670)x100 CPI for 2013=113.43 CPI for 2014= (950/670)100 141.79 CPI for 2015= (1230/670)100 183.58 Inflation rate between 2014 to 2015 ((Current period CPI-Prior period CPI)/Prior period CPI)) 100 (183.58-141.79)/141.79 =-41.79/141.79=29.47% 150% Current period (2010) CPI =98.5 CPI for base year 2009) =100Related Questions
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