Chapter 7 Macro review (Homework Mindtap)
Which of the following does the Consumer Price Index does not include? a. Capital equipment purchased by businesses b. Household purchases of used computers c. Household purchases of foreign cars
The CPI goal is to track prices paid by a typical consumer or household and no one else. The CPI includes household purchases of foreign cars and used computers but not capital equipment purchased by businesses. The CPI only cares for households. a. Capital equipment purchased by businesses
Which of the following goods are included in the GDP price index but ignored by the CPI? a. Household purchases of used computers b. Fruits produced in the United States and consumed by U.S households c. U.S cars purchased by foreigners
The CPI includes goods and services produced by households. The GDP price index includes all goods and services included in GDP. Cars manufactured in the U.S and purchased by foreigners are included in GDP price but not in the CPI. On the other hand used computers purchased by U.S households are included in the CPI but not in the GDP. Fruits produced in US and consumed by U.S households are included in both indexes. c. U.S cars purchased by foreigners
For which of the following is the CPI not used? a. Calculating real GDP from nominal GDP b. Setting an inflation target c. Indexing payments
The CPI is an index of the cost. The CPI tracks the purchasing power of money through time. The CPI is used for indexing payments. The CPI is used to calculate inflation, it is also used when setting an inflation target. However, the CPI does not track prices of all final goods and services included in GDP, it is NOT used to calculate real GDP from the nominal GDP. a. Calculating real GDP from nominal GDP
Suppose Karen is a cinephile and buys only movie tickets. Karen deposits $2,000 in a bank account that pays an annual interest rate of 10%. You can assume that this interest rate is fixed-that is, it won't change over time. At the time of her deposit, a movie ticket is priced at $10.00. Initially, the purchasing power of Karen's $2,000 deposit is .....movie tickets.
2000/10=200 movie tickets
Laura and her employer both expected inflation to be 3% between 2010 and 2011, so they agreed, in a two-year contract, that she would earn $12.00 per hour in 2010 and $12.36 per hour in 2011. However, suppose inflation between 2010 and 2011 actually turned out to be 5%, not 3%. For example, suppose the price of milk rose from $3.00 per gallon to $3.15 per gallon. This means that 2010 and 2011, Laura's nominal wage .............. by.........., and her real wage.............. by approximately ...........
Find the percentage change in nominal wage. Percentage change in nominal wage=(nominal wage 2011-nominal wage 2010/nominal wage 2010)*100 Percentage change in nominal wage =12.36-12/12*100=3% Find the percentage change in real wage=percentage change in nominal wage-Inflation rate Inflation rate=5% the percentage change in real wage=3%-5%=-2% Answer: increased by 3%, decreased by 2%
