Assignment 2 (15 Marks)
| Year | Price of Pizza | Quantity of Pizza | Price of Burger | Quantity of Burger | Price of coffee | Quantity of Coffee |
| 2019 | $ 8 | 350 | $ 10 | 200 | $ 8 | 150 |
| 2020 | $ 10 | 500 | $ 12 | 250 | $ 10 | 250 |
| 2021 | $ 13 | 700 | $ 14 | 400 | $ 15 | 400 |
1.Suppose people consume 3 different goods. The following table shows the prices and quantities of each good consumed in 2019, 2020, and 2021.
a.Calculate nominal GDP in each of the three years. (2 Marks)
b.Calculate Real GDP in each of the three years, using 2019 as the base year. (2 Marks)
c.Calculate the rate of inflation for 2020 and 2021 using the GDP deflator as your price index. Assume that 2019 is still the base year. (2 Marks)
d.Using the quantities from 2019 for your market basket, and 2019 as your base year, calculate the CPI for 2019, 2020 and 2021. (2 Marks)
e.Using the CPI calculate the rate of inflation. (2 Mark)
Suppose GDP equals $09 trillion, consumption equals $3 trillion, the government spends $2.5 trillion and has a budget deficit of $450 billion.
What is the Catch-Up Effect. Explain it by giving some Examples. (2 Marks)
Try to find public saving, taxes, private saving, national saving, and investment.
(3 Marks)
Answer:
