ECON 2030 Chapter 2 Assignment

The CPI differs from the GDP deflator in that

increases in the prices of foreign produced goods that are sold to U.S. consumers show up in the CPI but not in the GDP deflator

Table 24-1 The following table pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaces and 10 bushels of pecans The cost of the basket in Year 1 was

$225

Nate collected Social Security payment of $220 a month in Year 1. If the price index rose from 90 to 108 between Year 1 and Year 2, then his Social Security payments for Year 2 should have been

$264

If the CPI was 90 in 1975 and 225 is today, then $100 today purchases the same amount of goods and services as

$40.00 purchased in 1975

If the consumer price index was 96 in Year 1, 100 in Year 2, and 102 in Year 3, then the base year must be

Year 2

The CPI is a measure of the overall cost of the goods and services bought by

a typical consumer, and the CPI is computed and reported by the Bureau of Labor Statistics

Table 24-2 The following table pertains to Wrexington, an economy in which the typical consumer's basket contains of 20 pounds of meat and 10 toys The cost of the basket

increased from Year 1 to Year 2 and increased from Year 2 to Year 3

During period of deflation, the nominal interest rate will be

lower than the real interest rate

Suppose the price of a quart of milk rises from $1.00 to $1.20 and the price of a T-shirt rises from $8.00 to $9.60. If the CPI rises from 150 to 195, then people likely will buy

more milk and more T-shirts

The inflation rate is defined as the

percentage change in the price level from the previous period.

Table 24-2 The following table pertains to Wrexington, an economy in which the typical consumer's basket contains of 20 pounds of meat and 10 toys The inflation rate was

positive in Year 2 and positive in Year 3

Core CPI is

the CPI excluding food and energy

Two common measures of the overall level of prices are

the GDP deflator and the consumer price index

If Year 1 is the base year and Year 2 is the following year, then the inflation rate in Year 2 equals

[(CPI in Year 2 - CPI in Year 1)/(CPI in Year 1] * 100

One of the widely acknowledged problems with using the consumer price index as a measure of the cost of living is that the CPI

fails to account for the introduction of new goods

Consider a small economy in which consumers buy only two goods: pretzels and cookies. In order to compute the consumer price index for this economy for two or more consecutive years, we assume that

neither the number of pretzels nor the number of cookies bought by the typical consumer changes from year to year.

Suppose the consumer price index was 184 in Year 1 and 198.17 in Year 1. The nominal interest rate during this period was steady at 5.8 percent. What was the real interest rate during this period?

-1.9 percent

If the nominal interest rate is 5 percent and the real interest rate is 7 percent, then the inflation rate is

-2 percent

Table 24-1 The following table pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaces and 10 bushels of pecans If Year 1 is the base year, then the CPI for Year 1 was

100.0

If the price index was 90 in Year 1, 100 in Year 2, and 95 in Year 3, then the economy experienced

11.1 percent inflation between Years 1 and 2, and 5 percent deflation between Years 2 and 3

Table 24-2 The following table pertains to Wrexington, an economy in which the typical consumer's basket contains of 20 pounds of meat and 10 toys If the base year is Year 1, then the CPI in Year 2 was

112.5

Table 24-3 The following table lists the per gallon prices of gas and milk for the months of April, May, and June. Assume that the typical consumer buys 60 gallons of gas and 4 gallons of milk each month, and that April is the base period What is the consumer price index for May?

167

Table 24-1 The following table pertains to Pieway, an economy in which the typical consumer's basket consists of 15 bushels of peaces and 10 bushels of pecans If Year 1 is the base, then the inflation rate in Year 2 was

4.4 percent

If the consumer price index was 100 in the base year and 106 in the following year, then the inflation rate was

6 percent

Table 24-3 The following table lists the per gallon prices of gas and milk for the months of April, May, and June. Assume that the typical consumer buys 60 gallons of gas and 4 gallons of milk each month, and that April is the base period What is the inflation rate for May?

67.2%