Question

How much of the following items would be worth in today's dollars if today's CPI is 258?

• Popcorn that was sold for $5 in 2009 and the CPI in 2009 was 214

• A cup that was sold for $12 in 2015 and the CPI in 2015 was 237

3. Refer to the table below for an imaginary economy of Flowerland.

Year Real GDP Population

2015 50 million 50 million

2016 60 million 52 million

Based on the information given in the table calculate;

• Real GDP Per Person (or capita)

• Percentage increase in the real GDP per person over the time period given and analyze.

4. In an imaginary economy of Cotton Land, 180,000 tons of cotton were produced in a day. The number of people who were involved in this production was 3500 and each of them worked for 8 hours. Further, there are 50 companies that employed these people in their processing plants. Calculate the productivity of this economy.

Answer 1

2) converting yesterday's dollar into today's dollar
Y_{2009-> today} = Y₂₀₀₉ x (CPI _today / CPI₂₀₀₉) = $5 x (258/214) = $6.03
Hence the real worth has increased

Y_2015->today = Y₂₀₁₅ x (CPI_today / CPI₂₀₁₅) = $12 x (258/237) = $13.06
Hence the real worth has increased

3) Real GDP per capita is used to measure the standard of living over time as it measures the total economic output of a country divided by its population
thus Real GDP per capita = Real GDP / population

Real GDP per capita for 2015= 50 million / 50 million= 1
Real GDP per capita for 2016 = 60 million / 52 million = 1.15
Thus in the year 2016 standard of living increases

Growth rate = ( V ending – V beginning) / V beginning

Rate of growth of real GDP per capita from year 2015 to year 2 016= (1.15 - 1)/ 1= 15%
Hence, economy has grown at the rate of 15% over time