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3 years ago

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Suppose that in 1984 the total output in a single-good economy was 7,000 buckets of chicken. Also suppose that in 1984 each buck

et of chicken was priced at $10. Finally, assume that in 2005 the price per bucket of chicken was $16 and that 22,000 buckets of chicken were produced.1. Determine the GDP price index for 1984, using 2005 as the base year2. By what percentage did the price level, as measured by this index, rise between 1984 and 2005?
3. What were the amounts of real GDP in 1984 and 2005? Contiune to use 2005 as the base year.

1 answer:

Oduvanchick [21]3 years ago

3 0

Answer: The answer is as follows:

Explanation:

Given that,

Output in 1984 = 7,000 buckets of chicken

Price in 1984 = $10

Output in 2005 = 22,000

Price in 2005 = $16

(1) GDP price index for 1984, using 2005 as the base year:

= $\frac{Price\ of\ good\ in\ specific\ year}{Price\ of\ good\ in\ base\ year}\times100$

= $\frac{10}{16}\times100$

= 62.5

(2) Price level, as measured by this index, rise between 1984 and 2005:

Percentage change in the price level = $\frac{New\ price\ level - original\ price\ level}{Price\ in\ base\ year}\times100$

= $\frac{100 - 62.5}{62.5}\times100$

= 60%

(3) Real GDP for t year = Base price × Quantity in t year

Real GDP in 1984 = Quantity in 1984 × Price in 2005

= 7,000 × 16

= $ 112,000

Real GDP in 2005 = Quantity in 2005 × Price in 2005

= 22,000 × 16

= $ 352,000

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