Growth in Real GDP

ECO 202
Name
Course
Instructor
Date
1] Growth in Real GDP
20132014Quantity Price ValueQuantity Price Value10 shirts2020015 shirts213155 hamburgers52510 hamburgers660225375
Real output for 2014 with 2013 base years
Quantity Price Value15 shirts2030010 hamburgers550350
The GDP deflator= 375/350 =1.07143
Growth in real GDP = [(350-22)5/ 225] *100= 0.5556= 55.56%
Unemployment
The natural rate of unemployment is the rate at which the economy produces at its potential GDP, when the cyclical unemployment is zero (McEachern, 2011). Typically, the natural rate of unemployment ranges between 4 to 6% of the labor force (McEachern, 2011). At full employment the aggregate supply of labor and the aggregate demand are equal, but even at full employment there is still frictional and structural unemployment. The natural unemployment rate then exists because of the frictional and structural unemployment. Frictional unemployment occurs when job seekers are looking for job openings while transitioning, and since the job seekers do not have perfect information frictional unemployment then exists. On the other hand, structural unemployment occurs because of a mismatch in skills between what the workers have and what the workers desire. Technology advances may make certain jobs redundant, resulting in structural unemployment with demand declining in the affected industries.
3] CPI table
YearCPI2008100.02009102.52010106.02011111.0
Inflation rate from 2010 to 2011?
The inflation rate is represented as the change in the CPI
Hence, inflation rate = [(111-106)/ 111]*100= 4.72 %
B. standard of living in 2009 with 2008 as the base year
The inflation rate in 2009 = (102.5-100)/100*100= 2.5%
30,000*102.5= $ 30,750
c. Challenges of using the CPI as a measure of standard of living
The consumer price index (CPI), measures the changes in the cost living by focusing on the rising incomes to maintain the standard of living. One of the major challenges is that the introduction of new goods allows the consumer to choose from a variety of goods. Since the CPI is then based on a fixed basket of goods and services, the measure is then inadequate to show a true reflection of the cost of living (Mankiw, 2011). The introduction of the new goods may have a bigger influence on the changes in the value of the dollar, but the CPI fails o capture this information. Additionally, the introduction of new goods does not mean that they are perfect substitutes and the CPI fails to take into account such changes.
Even though, the CPI represents inflation there are concerns that the measure may not be a true reflection of the inflation, depending on the basket of goods chosen and how the CPI is measured. There are instances when the CPI ignores the quality of goods, meaning that the changes in price maybe as a result of quality changes, to the extent that the goods seem different. Hence, the CPI does not nec...