Solution Found!
GDP personal consumption expenditures (cont’d). Refer to
Chapter 14, Problem 12E(choose chapter or problem)
GDP personal consumption expenditures (cont’d). Refer to Exercise 14.11. Suppose the output quantities in 1970, measured in billions of units purchased, are as follows:
Durable goods: 10.9
Nondurable goods: 14.02
Services: 42.6
a. Use the outputs to calculate the Laspeyres index from 1960 to 2010 (same increments as in Exercise 14.11) with 1970 as the base period.
b. Plot the simple composite index of Exercise 14.11 and the Laspeyres index of part a on the same graph. C/omment on the differences between the two indexes.
Questions & Answers
QUESTION:
GDP personal consumption expenditures (cont’d). Refer to Exercise 14.11. Suppose the output quantities in 1970, measured in billions of units purchased, are as follows:
Durable goods: 10.9
Nondurable goods: 14.02
Services: 42.6
a. Use the outputs to calculate the Laspeyres index from 1960 to 2010 (same increments as in Exercise 14.11) with 1970 as the base period.
b. Plot the simple composite index of Exercise 14.11 and the Laspeyres index of part a on the same graph. C/omment on the differences between the two indexes.
ANSWER:Step 1 of 8
(a)
Compute the Laspeyres index with 1970 as the base period.
The formula for Laspeyres index is as follows:
Where,
