Exam 11: Measuring the Cost of Living: Part A

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Suppose that the price of one ear of corn was $0.05 in 1920,that the CPI in 1920 was 10,and that in 1990 the CPI was 180.What is the price of a 1920 ear of corn in 1990 dollars?

(Short Answer)

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Question 21

If the real interest rate is 6.8% and the inflation rate is 3.9%,what is the nominal interest rate?

(Short Answer)

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Question 22

Suppose the nominal interest rate this year is 6.5% and that the economy experiences 2.3% deflation.What is the real interest rate?

(Short Answer)

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Question 23

Suppose Stan Musial earned $115,000 in 1947.If the CPI was 82 in 1947,and was 246 in 1990,what is Stan Musial's 1947 salary in 1990 dollars?

(Short Answer)

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Question 24

Suppose that the CPI in 1990 was 150,that the inflation rate in 1991 was 6%,and that the inflation rate in 1992 was 4%.What was the CPI in 1991 and 1992?

(Short Answer)

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Question 25

What do real interest rates account for that nominal interest rates do not?

(Essay)

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Question 26

In 1954,Mickey Mantle earned $21,000 playing for the New York Yankees.The CPI in 1954 was 26.9,and the CPI in 2010 was 218.06.What is Mickey Mantle's 1954 salary in 2010 dollars?

(Short Answer)

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Question 27

If the nominal interest rate is 8.3% and the inflation rate is 4.4%,what is the real interest rate?

(Short Answer)

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Question 28

In a simple economy,people consume only 2 goods,food and clothing.The market basket of goods used to compute the CPI consists of 50 units of food and 10 units of clothing. a.What are the percentage increases in the price of food and in the price of clothing? b.What is the percentage increase in the CPI? c.Do these price changes affect all consumers to the same extent? Explain.

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Question 29

Suppose the Tooth Fairy paid 50 cents for a tooth in 1970.The CPI in 1970 was 38.8,while the CPI in 2010 was 218.1.What is the value of the Tooth Fairy's payment in 2010 dollars?

(Short Answer)

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Question 30

List the five steps for calculating the consumer price index and inflation rate.

(Essay)

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Question 31

For a country like the United States,explain why the CPI would increase at a faster rate than the GDP deflator during periods of oil and gasoline price increases.

(Short Answer)

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Question 32

Consumer spending in what category is the largest component of the CPI?

(Short Answer)

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Question 33

Scenario 24-5 Suppose the residents of Mediaville spend all of their income on books,CDs,and DVDs.In 2009,they buy 400 books for $3,200,200 CDs for $1,400,and 100 DVDs for $900.In 2010,they buy 360 books for $3,240,250 CDs for $1,500,and 125 DVDs for $1,250.Assume that the market basket for the CPI is defined in the base year. -Refer to Scenario 24-5.Using 2009 as the base year,what is the CPI in each year?

(Short Answer)

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Question 34

Scenario 24-5 Suppose the residents of Mediaville spend all of their income on books,CDs,and DVDs.In 2009,they buy 400 books for $3,200,200 CDs for $1,400,and 100 DVDs for $900.In 2010,they buy 360 books for $3,240,250 CDs for $1,500,and 125 DVDs for $1,250.Assume that the market basket for the CPI is defined in the base year. -Refer to Scenario 24-5.What are the prices of books,CDs,and DVDs in 2010?

(Short Answer)

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(80)

Question 35

Suppose that the price of one gallon of milk was $0.25 in 1950,that the CPI in 1950 was 25,and that in 2000 the CPI was 200.What is the price of a 1950 gallon of milk in 2000 dollars?

(Short Answer)

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Question 36

Explain how the prices of goods and services used in the CPI differ from the prices reflected by GDP deflator.

(Essay)

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Question 37

Suppose the typical basket for the calculation of the CPI includes one computer.Since computers have gotten better over time as a result of technological change,what problem does this create for calculating the CPI?

(Essay)

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Question 38

Suppose that the CPI in 2009 is 220 and that the inflation rate is 5% in 2010.What is the CPI in 2010?

(Short Answer)

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Question 39

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Exam 11: Measuring the Cost of Living: Part A

Suppose that the price of one ear of corn was $0.05 in 1920,that the CPI in 1920 was 10,and that in 1990 the CPI was 180.What is the price of a 1920 ear of corn in 1990 dollars?

If the real interest rate is 6.8% and the inflation rate is 3.9%,what is the nominal interest rate?

Suppose the nominal interest rate this year is 6.5% and that the economy experiences 2.3% deflation.What is the real interest rate?

Suppose Stan Musial earned $115,000 in 1947.If the CPI was 82 in 1947,and was 246 in 1990,what is Stan Musial's 1947 salary in 1990 dollars?

Suppose that the CPI in 1990 was 150,that the inflation rate in 1991 was 6%,and that the inflation rate in 1992 was 4%.What was the CPI in 1991 and 1992?

What do real interest rates account for that nominal interest rates do not?

In 1954,Mickey Mantle earned $21,000 playing for the New York Yankees.The CPI in 1954 was 26.9,and the CPI in 2010 was 218.06.What is Mickey Mantle's 1954 salary in 2010 dollars?

If the nominal interest rate is 8.3% and the inflation rate is 4.4%,what is the real interest rate?

Suppose the Tooth Fairy paid 50 cents for a tooth in 1970.The CPI in 1970 was 38.8,while the CPI in 2010 was 218.1.What is the value of the Tooth Fairy's payment in 2010 dollars?

List the five steps for calculating the consumer price index and inflation rate.

For a country like the United States,explain why the CPI would increase at a faster rate than the GDP deflator during periods of oil and gasoline price increases.

Consumer spending in what category is the largest component of the CPI?

Suppose that the price of one gallon of milk was $0.25 in 1950,that the CPI in 1950 was 25,and that in 2000 the CPI was 200.What is the price of a 1950 gallon of milk in 2000 dollars?

Explain how the prices of goods and services used in the CPI differ from the prices reflected by GDP deflator.

Suppose the typical basket for the calculation of the CPI includes one computer.Since computers have gotten better over time as a result of technological change,what problem does this create for calculating the CPI?

Suppose that the CPI in 2009 is 220 and that the inflation rate is 5% in 2010.What is the CPI in 2010?

Ten Principles of Economics

Ten Principles of Economics: How People Make Decisions

Ten Principles of Economics: How People Interact

Ten Principles of Economics: How the Economy As a Whole Works

Ten Principles of Economics: Part A

Ten Principles of Economics: Part B

Thinking Like an Economist

Thinking Like an Economist: The Economist As Scientist

Thinking Like an Economist: The Economist As Policy Adviser

Thinking Like an Economist: Why Economists Disagree

Thinking Like an Economist: Lets Get Going

Thinking Like an Economist: Graphing a Brief Review

Thinking Like an Economist: Part A

Thinking Like an Economist: Part B

Interdependence and the Gains From Trade

Interdependence and the Gains From Trade: A Parable for the Modern Economy

Interdependence and the Gains From Trade: Comparative Advantage the Driving Force of Specialization

Interdependence and the Gains From Trade: Applications of Comparative Advantage

Interdependence and the Gains From Trade: Conclusion

Interdependence and the Gains From Trade: Part A

Interdependence and the Gains From Trade: Part B

The Market Forces of Supply and Demand

The Market Forces of Supply and Demand:Markets and Competition

The Market Forces of Supply and Demand: Demand

The Market Forces of Supply and Demand: Supply

The Market Forces of Supply and Demand: Supply and Demand Together

The Market Forces of Supply and DemandConclusion How Prices Allocate Resources

The Market Forces of Supply and Demand: Part A

The Market Forces of Supply and Demand: Part B

Elasticity and Its Applications

Elasticity and Its Applications: The Elasticity of Demand

Elasticity and Its Applications: The Elasticity of Supply

Elasticity and Its Applications: Three Applications of Supply,demand,and Elasticity

Elasticity and Its Applications: Part A

Elasticity and Its Applications: Part B

Supply Demand and Government Policies

Supply Demand and Government Policies: Controls on Prices

Supply Demand and Government Policies: Taxes

Supply Demand and Government Policies: Part A

Supply Demand and Government Policies: Part B

Consumers Producers and the Efficiency of Markets

Consumers Producers and the Efficiency of Markets: Consumer Surplus

Consumers Producers and the Efficiency of Markets: Producer Surplus

Consumers Producers and the Efficiency of Markets: Market Efficiency

Consumers Producers and the Efficiency of Markets: Conclusion Market Efficiency and Market Failure

Consumers Producers and the Efficiency of Markets: Part A

Consumers Producers and the Efficiency of Markets: Part B

Application the Cost of Taxation

Application the Cost of Taxation: The Deadweight Loss of Taxation

Application the Cost of Taxation: The Determinants of the Deadweight Loss

Application the Cost of Taxation: Deadweight Loss and Tax Revenue As Taxes Vary

Application the Cost of Taxation: Conclusion

Application the Cost of Taxation: Part A

Application the Cost of Taxation: Part B

Application International Trade

Application International Trade: The Determinants of Trade

Application International Trade: The Winners and Losers From Trade

Application International Trade: The Arguments for Restricting Trade

Application International Trade: Conclusion

Application International Trade: Part A

Application International Trade: Part B

Measuring a Nations Income

Measuring a Nations Income: The Economy's Income and Expenditure