# Econ2Hw6
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1.
( a )
A measure of the price level calculated as the ratio of nominal GDP to real GDP in percentage
( b )
A measure of the cost of a basket of goods and services bought by firms
2.
GDP measures the value of goods newly produced, but reselling used goods doesn't produce any value.
3.
( a )
GDP = The households expenditure on goods = $180.
( b )

| Values | Input | Output | Added |
| ------ | ----- | ------ | ------ |
| Farmer | $0 | $100 |**$100**|
| Miller | $100 | $150 |**$50** |
| Baker | $150 | $180 |**$30** |

( c )
Sum of values added=$100+$50+$30=$180=GDP
GDP can also be calculated by summing up all values added by each firms.
4.
( a )
Extra labor force caused productivity to rise. The measure of production, GDP, rose too.
( b )
Time workers spent working increased and leisure time decreased. This measure of well-being is worse than before 1970.
( c )
New women workers might had better social well-being because they are more likely to socialize with their colleagues and form friendship.
This kind of well-being is difficult and impractical to quantify.
5.
( a )
| Tennis Balls | Golf Balls | Bottles of Gatorade |
| ------ | ----- | ------ |
| 0% | 50% | 100% |

( b )
In 2020: $2\times100+4\times100+1\times200=800$

In 2021: $2\times100+6\times100+2\times200=1200$

$\frac{1200-800}{800}=50\%$
( c )
No. Rising price and falling quantity of a bottle both results from an increasing bottle size. By multiplying price and quantity, there will be no net change simply because of of the increased bottle size.
( d )
If the new flavors are perfect substitutes of the old ones, then it wouldn't affect the calculations of inflation rates.
6.
( a )
If he increasing of the Social Security benefits are proportional to increases in the CPI each year, then a person consuming an average market basket will experience no changes in their standard of living.
( b )
Healthcare makes up a larger proportion of the market baskets of the elderly's. Therefore, the faster-rising healthcare cost subsidized by the Social Security have more impact on the elderly and make them better off each year.