Chapter 23 part 2
If the CPI was 202 in 2014 and 218 in 2019, did the real wage rate fall by more or less than 35 percent? The real wage rate in 2014 was _____ and the real wage rate in 2019 was ________ Between 2014 and 2019, the real wage rate fell by _____ than 35 percent.
39.60; 26.61 less
Sally worked hard all year and put her savings into a mutual fund that paid a nominal interest rate of 8 percent a year. During the year, the CPI increased from 170 to 180. What was the real interest rate that Sally earned?
Sally earned a real interest rate of 2.1 percent per year
When the nominal interest rate equals zero, the real interest rate equals _______. The real interest rate exceeds the nominal interest rate when the inflation rate is _______.
the negative of the inflation rate negative
If nominal GDP increases by 5 percent a year and the GDP price index rises by 2 percent a year, then real GDP increases by _______.
3 percent a year
What question does the CPI answer? The CPI tells us _______. Why is a student not an average urban consumer? Because _______. What question does the student CPI answer? The student CPI tells us _______. For what purpose can we use the fact that the student's inflation rate exceeds the official inflation rate? Why was the student's average inflation rate from 2006 to 2019 double the official average inflation rate?
how the prices of the goods and services bought by urban consumers are changing a student purchases a different basket of goods and services how the prices of the goods and services bought by the average student are changing As the basis to lobby for greater increases in student grants and scholarships The student basket has fewer goods and services, and these goods and services tend to have greater price increases.
When the price level is rising at _______ and the real interest rate is 1 percent a year, the nominal interest rate is 3 percent a year.
2 percent a year
The GDP price index in the United States in 2017 was about 108, and real GDP in 2017 was $18.1 trillion (2012 dollars). The GDP price index in the United States in 2019 was about 112, and real GDP in 2019 was $19.0 trillion (2012 dollars). Calculate nominal GDP in 2017 and in 2019 and the percentage increase in nominal GDP between 2017 and 2019.
Nominal GDP in 2017 is $19.5 trillion. Nominal GDP in 2019 is $21.3 trillion. The percentage increase in the nominal GDP between 2017 and 2019 is 9.2 percent.
The CPI bias arises from all of the following items except _______.
The goods and services bought by poor people
The GDP deflator in the United States in 2018 was 110, and real GDP in 2018 (in 2012 dollars) was $18.6 trillion. The GDP deflator in the United States in 2019 was 112, and real GDP in 2019 (in 2012 dollars) was $19.0 trillion. What was the percentage increase in production between 2018 and 2019, and by what percentage did the price level rise between 2018 and 2019
The percentage change in production between 2018 and 2019 is 2.2 percent. The change in the price level between 2018 and 2019 is 1.8 percent.
Calculate the real price of gasoline in each year in 1982-1984 dollars and enter your numbers in the table. In which of the four years was the real price of gasoline highest? In which of the four years was the real price of gasoline lowest?
Year Price (cents per gallon) CPI Real price (1982-1984 cents per gallon) 1985 112 107.6 *104 1995 115 152.4 *75 2005 230 195.3 *118 2015 245 237.0 *103 2005 1995
Why can't we compare the earnings of Gone With the Wind with the earnings of Avengers: Endgame without being concerned about the years in which the movies were released? We can't because _______. What is the real variable that Box Office Mojo uses to compare the box office successes of Gone With the Wind and Avengers: Endgame? If we calculate real box office earnings use the CPI, what is the real variable that we measure? We measure the _______. Do the Box Office Mojo method and the CPI method answer the same question?
a dollar today buys less than a dollar bought in 1939 the number of tickets sold other goods and services forgone to see each movie—the opportunity cost of seeing each movie No, the Box Office Mojo method is the number of tickets sold and the CPI measure if the number of tickets sold multiplied by the real price of a ticket
The GDP price index is an average of the current prices of _____ included in the GDP, expressed as a percentage of base year prices. The nominal wage rate is the average _____ wage rate measured in _____ dollars. The real wage rate is the average _____ wage rate measured in the dollars of _____ year. The nominal interest rate is the dollar amount of interest expressed as a percentage of the amount _____. The real interest rate is the goods and services forgone in interest, expressed as a percentage of the amount _____ and calculated as the nominal interest rate minus the _____.
all the goods and services hourly; current; hourly; a reference base loaned; loaned; inflation rate
When the CPI increases from 200 in 2018 to 210 in 2019 and the nominal wage rate is constant at $10 an hour, the real wage rate _______.
decreases by 5 percent
When the price level _______ the inflation rate _______.
rises rapidly; is high
The table shows the prices that Terry paid for some of his expenditures in June and July 2019. Explain and discuss why these prices might have led to commodity substitution or outlet substitution. Item Price in June Price in July (dollars per unit) Steak 4.11 4.01 Bread 3.25 3.12 Bacon 3.62 3.64 Milk 2.62 2.62 Tomatoes 1.60 1.62 Apples 1.18 1.19 Bananas 0.62 0.66 Chicken 1.28 1.26 Lettuce 1.64 1.68
steak and bread; less bananas and lettuce; more
The BLS reported that the CPI in July 2018 was 252. This news tells you that _______
the prices of consumption goods and services have risen, on average, by 152 percent since the base year
The CPI measures the average prices paid by _______ for _______.
urban consumers; a fixed basket of consumption goods and services
Of the alternative measures of the price level, _______ overcomes the bias of the CPI and is a better measure of the cost of living because it _______.
PCEPI; uses a current basket of all consumption goods
The nominal wage rate is the average _____ wage rate measured in _____ dollars. The real wage rate is the average _____ wage rate measured in the dollars of _____ year
hourly; current; hourly; a reference base
In 2019, Annie, an 80-year-old, is telling her granddaughter Mary about the good old days. Annie says that in 1935, you could buy a nice house for $15,000 and a jacket for $5. Mary says that in 2019 such a house costs $275,000 and such a jacket costs $60. The CPI in 1935 was 16.7 and in 2019 it was 250.1. Which house has the lower real price? Which jacket has the lower real price? The house with the lower price is the _______, and the jacket with the lower price is the _______.
$15,000 house in 1935; $60 Jacket in 2019
Which movie had the greater real box office revenues, E.T.: The Extra-Terrestrial, which earned $435 million in 1982 or Titanic, which earned $601 million in 1997? Calculating the real box office revenues in 1997 dollars, the $435 million that E.T. earned in 1982 was the equivalent of ________ million (1997 dollars), so _____ had the larger real box office revenues.
$723 Million; ET