ECO121: Individual Assignment 1

This assignment accounts for 5% of the students' final score.

Deadline: 25/09/2023 11:55 PM. Submission via LMS

Question A: (2 points)

Suppose that the residents of Westeros spend all their income on cauliflower, broccoli, and carrots. In
2001 they buy 100 heads of cauliflower for $150, 50 bunches of broccolis for $75, and 500 carrots for
$50. In 2002 they buy 75 heads of cauliflower for $200, 80 bunches of broccolis for $100, and 500 carrots
for $75. If the base year is 2001, what is the CPI in both years? What is the inflation rate in 2002?

Question B: (8 points)

Assume the following:

- FPT is an autonomous country.

- The only good/service produced at FPT is undergrad (freshmen) education.

1. Fill in the following:

# of FPT Price Nominal Real GDP Real GDP

Year
freshmen (Tuition) GDP (1950 $) (2000$)
1950 400 2,000
2000 900 20,000
2001 1,000 21,000
2002 1,100 23,000
2003 1,000 25,000
2004 1,200 28,000

2. Find the growth rate of nominal GDP for 2002, 2003 and 2004.
3. Find the growth rate of real GDP (using 2000 $) for 2002, 2003 and 2004.
4. Find the growth rate of real GDP (using 1950 $) for 2002, 2003 and 2004.
5. Why are your answers in 2, 3 and 4 different/same?
6. Compute inflation using GDP deflator (using 2000$) for 2002, 2003, 2004.
7. Beside GDP deflator what other price indices are used in measuring inflation?
8. Which one is the best? Why?