Inflation problems. Search the Internet for the 2013 Economic Report of the Pres
ID: 1179727 • Letter: I
Question
Inflation problems. Search the Internet for the 2013 Economic Report of the President and use the GDP deflator price index (Table B-3) to answer these questions.
a. Provide the Internet address to prove you found the table.
b. An analyst locates a study that estimates the average beachgoer was willing to pay $2.25 per hour in 2000 to visit a renourished beach. What is the value of this in 1999 dollars?
c. An analyst determines that the real operating expenses for a sewage treatment plant were $40,000 in constant 2000 prices. What is the value of this expense in 2010 prices?
Explanation / Answer
a. http://www.whitehouse.gov/sites/default/files/docs/erp2013/ERP2013_Appendix_B.pdf
b. $2.25 in the year 2000 = $2.20 in 1999
Gdp price deflator for year 2000= 88.723
GDp price deflator for 1999= 86.842
(2.25/88.723)*86.842=2.20
c)$40,000 in 2000 = $50,040.24 in 2010
GDp price deflator for 2000 =88.723
GDP price deflator for 2010 =110.993
same procedure as before