Exhibit: Quantity Consumed and Price of Good In the Exhibit, the Citizens of Country XYZ Come to c

question 73

Essay

Exhibit: Quantity Consumed and Price of Good $$\begin{array} { l c c } & \text { Base Year } & \text { Later Year } \\\text { Price of good A } & 100 & 200 \\\text { Quantity of good A } & 100 & 200 \\\text { Price of good B } & 100 & 100 \\\text { Quantity of good B } & 100 & 100\end{array}$$ In the exhibit, the citizens of country XYZ come to desire more of good A. As a result, the quantity and price of the good both rise. a. Compute nominal GDP in the base year and later year.
b. Compute real GDP in the base and later years (in base-year prices).
c. Compute the GDP deflator in the later year, using your answers to parts a and $b$ .
d. Compute a fixed-weight price index for the later year, using the base-year quantities as weights.
e. Which price index rises faster, the GDP deflator (Paasche) index or the fixed-weight index (Laspeyres) index?

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Definitions:

Uniform Commercial Code

A comprehensive set of laws governing all commercial transactions in the United States, intended to harmonize laws across the states.

Sale of Goods

A commercial transaction in which a seller transfers ownership of tangible personal property to a buyer for a price.

Duress

Compulsion by threat or force, often used in legal contexts where a person's action is excused because it was performed under coercion.

Coercion

Coercion refers to the practice of persuading someone to do something by using force or threats.