Question

Consider an economy that only produces and consumes milk and cars. In the table are data...

Consider an economy that only produces and consumes milk and cars. In the table are data from 2 different years

Year 2000 Year 2016
Price for a litre of milk $1 $2
# of milks produced 500 400
Price for a car $50 $100
# of cars produced 100 120

a) using the year 2000 as a base year, compute for 2000 and 2016 for the following statistics: nominal GDP, real GDP, price deflator and the CPI

b) How much have prices increased between years 2000 and 2016 using the CPI?

c) How much have prices increased between years 2000 and 2016 using the GDP deflator?

d) How does the inflation computed with the GDP deflator differ from the inflation derived from the CPI. Is this true in this problem? why?

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