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  3. 3 assume an economy in which only broccoli and cauliflower...

Question: 3 assume an economy in which only broccoli and cauliflower...

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3. Assume an economy in which only broccoli and cauliflower are produced. In year 1, 300 million pounds of broccoli are produced and consumed, and its price is S0.50 per pound, while 400 million pounds of cauliflower are produced and consumed and its price is S0.40 per pound. In year 2 250 million pounds of broccoli are produced and consumed and its price is S0.50 per pound, while 400 million pounds of cauliflower are produced and its price is SO.80 per pound (a) Using year 1 as the base year, calculate the GDP price deflator in years 1 and 2, and calculate the rate of inflation between years 1 and 2 from the GDP price deflator (b) Using year 1 as the base year, calculate the CPI in years 1 and 2, and calculate the CPI rate of inflation. Explain any differences in your results between parts (a) and (b)

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