Consider an economy that produces and consumes shoes and houses. In the table below are data for two different users.   2000 2001 Price of a house $120,000 $145,000 Number of houses produced 1000 1050       Price of a pair of shoe $150 $170 Number of pairs of shoes produced 650,000 525,000 Year 2000 Year 2001 Price of a house $120,000 Price of a pair of shoes $150 $170 Number of houses produced 1,000 Number of pairs of shoes 650,000 525,000 (a) What is the Consumer Price Index (CPI)? (b) Calculate the CPI for both years. (c) Calculate the rate of inflation for 2001 using the CPI. (d) Calculate the GDP deflator for both years.

Question 2

Consider an economy that produces and consumes shoes and houses. In the table below are data for two different users.

  2000 2001
Price of a house $120,000 $145,000
Number of houses produced 1000 1050
     
Price of a pair of shoe $150 $170
Number of pairs of shoes produced 650,000 525,000

Year 2000 Year 2001 Price of a house $120,000 Price of a pair of shoes $150 $170 Number of houses produced 1,000 Number of pairs of shoes 650,000 525,000

(a) What is the Consumer Price Index (CPI)?

(b) Calculate the CPI for both years.

(c) Calculate the rate of inflation for 2001 using the CPI.

(d) Calculate the GDP deflator for both years.

(e) Calculate the rate of inflation for 2001 using the GDP deflator.

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