LaunchPad interactive activity
15. Suppose the country of Snowland uses the following market basket of goods to determine its consumer price index, with
Year 1 being the base year with a CPI of 100. Nominal GDP is also provided.
Market basket items
Year 1
Year 2
Year 3
Year 4
Loaf of bread
$2.50
$2.80
$3.00
$3.10
Movie ticket
$8.00
$8.80
$9.20
$9.50
Gallon of gasoline
$3.50
$4.20
$4.00
$3.60
Scented candle
$12.00
$13.20
$14.00
$14.30
Nominal GDP
$5 billion
$5.6 billion
$6.1 billion
$6.5 billion
a. Calculate the CPI in Snowland for each year, using
Year 1 as the base year with CPI = 100.
b. Calculate the rate of inflation (based on CPI) in Year
2, Year 3, and Year 4.
c. Using the CPI, calculate the real GDP in each of the
four years.
d. Between Year 1 and Year 4, what proportion of the
total increase in nominal GDP was due to inflation?
widents of which 200 are employed 30 are not work