Suppose that in 1984 the total output in a single-good economy was 7,000 buckets of chicken. Also suppose that in 1984 each bucket of chicken was priced at $10. Finally, assume that in 1996 the price per bucket of chicken was $16 and that 22,000 buckets were purchased. Determine the GDP price index for 1984, using 1996 as the base year. By what percentage did the price level, as measured by this index, rise between 1984 and 1996? Use the two methods listed in Table 7-6 to determine real GDP for 1984 and 1996.

ANSWERS:
X/100 = $10/$16 = .625 or 62.5 when put in percentage or index form (.625 x 100)

(100 - 62.5) / 62.5 = .60 or 60% (Easily calculated (16 - 10) / 10 = 6 / 10 = .6 = 60%

Method 1: 1996 = (22,000 x $16) / 1.0 = $352,000
1984 = (7,000 x $10) / .625 = $112,000
Method 2: 1996 = 22,000 x $16 = $352,000
1984 = 7,000 x $16 = $112,000