Explain how technique of chain-weighted real gdp alleviates

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Reference no: EM13152533

1. Suppose an economy produces only food and clothing, and that price and quantity data are given in the table below.

Year 1 Year 2

Good Quantity Price Quantity Price

Food 20 £6 25 £10

Clothing 10 £8 20 £7

(a) Compute year 1 nominal GDP and year 2 nominal GDP. Now sup- pose that year 1 is the base year. Compute year 2 real GDP, the growth rate of real GDP and the implicit price deflator for year 2.

(b) Suppose that year 2 is the base year. Compute year 1 real GDP, the growth rate of real GDP and the implicit price deflator for year 1.

(d) Explain how the technique of Chain-Weighted Real GDP alleviates this problem.

Reference no: EM13152533

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