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Consider an economy that produces and consumes bread and automobiles In the table below are data for two different years Using the year 2000 as the base year compute

Consider an economy that produces and consumes bread and automobiles. In the table below are data for two different years. a. Using the year 2000 as the base year, compute the following statistics for each year: nominal GDP, real GDP, the implicit price deflator for GDP, and a fixed-weight price index such as the CPI. b. How much have prices risen between year 2000 and year 2010? Compare the answers given by the Laspeyres and Paasche price indices. Explain the difference. c. Suppose you are a member of Parliament writing a bill to update the indexing provisions for the Canada Pension Plan. Would you use the GDP deflator or the CPI? Why?

May 16 2020 View more View Less

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