Here is another problem like the one you solved. It is laid out the
same way. Again the point is to compute two price indeces, one like
the CPI, the other like the GDP deflator. Then we compute
GDP, and real GDP. The answers are below.
GOOD 1 GOOD 2 Value of
QUANT.
MARKET | QUANT.
MARKET
Tot. Output
YEAR PRODUCED PRICE PxQ | PRODUCED PRICE
PxQ
1995 100
3.00 300.00|
50
2.00 100.00
400.00
1996 110
2.50 275.00|
45
4.00 180.00
455.00
95 QUANT @ '96 PRICE 250.00| 95 QUANT @ '96
PRICE 200.00 450.00
96 QUANT @ '95 PRICE 330.00| 96 QUANT @ '95
PRICE 90.00 420.00
CPI FOR 1995 100.00
CPI FOR 1996 112.50 (450/400, ASSUME MKT BASKET IS 95 OUTPUT)
NOM. GDP , '95 400.00 (95 OUTPUT AT CURRENT PRICES)
NOM. GDP , '96 455.00 (96 OUTPUT AT CURRENT PRICES)
DEFLATOR FOR '96 108.33 (455/420)
REAL GDP FOR '96 420 USING DEFLATOR--PREFERRED
(455/108.33)
REAL GDP FOR '96 404.44 USING CPI (455/112.5)