Macro - 22.1 Tracking Inflation

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The following basket of goods is purchased every year for office use at Firm P: 500 boxes of coffee, 6 boxes of beverage stir sticks and 60 sleeves of paper cups. How much did it cost Firm P in 2015 if the prices were as follows: a box of coffee was $10, a box of beverage stir sticks was $5, and a sleeve of paper cups was $25.

$6530 500*10=5000 6*5=30 60*25=1500 5000+30+1500=6530

Movie Theater X orders monthly popcorn supplies. The "basket" of popcorn goods on the monthly order include 800 packs of bags, 16 boxes of popcorn kernels, 250 bottles of oil and 15 containers of salt. This month prices are $2.50 per pack of bags, $35 per box of kernels, $18 per bottle of oil, $11 per container of salt. What is the cost of Movie Theater X's basket of goods?

$7225 800*2.50=2000 16*35=560 250*18=4500 15*11=165 2000+560+4500+165=7225

The table below shows the total spending on a basket of goods and services; use this information to calculate the index number for the cost of a basket of goods and services in period 1, assuming Period 2 is the base year. (Round to 1 decimal place.) Total Spending Index Number P1 $1560 ? P2 $1460 100

106.8 plus or minus 0.2 To convert spending on the basket of goods and services to an index number, we use the base year as a starting point from which we measure changes in prices. The base year, by definition, has an index number equal to 100. In this question, Period 2 is the base year, so we divide Period 2's total spending $1,460 by itself and multiply by 100 to arrive at the index number of 100. 1460/1460×100=100 or 1460/14.6=100 Then, to figure out the value of the index number for Period 1, divide the dollar amount by 14.8 as well. Note that dollar signs cancel out so that index numbers have no units. 1560/14.6=106.8

Zimbabwe is going through hyperinflation. The table below shows what Zimbabwe residents spent on a basket of goods and services in three consecutive years. Use this information to calculate the inflation rate since the previous year for 2017. (Round your answer to two decimal places.) Total Expenditure P1 $10440 P2 $35860 P3 $452045

1085.29% (452045 - 35860) / 35860 x 100

The table below shows the total expenditure on a basket of goods and services; use this information to calculate the index number for the cost of a basket of goods and services in period 2, assuming Period 1 is the base year. (Round to 1 decimal place.) Total Expenditure P1 $1200 P2 $1350

112.5 Inflation Rate = (1350-1200)/1200 x100 = 12.5 Base Index Number = 100 100+12.5 = 112.5

The table below shows the index numbers for the cost of a basket of goods and services in each period. Use this information to calculate the inflation rate since the previous period. (Round to two decimals.) Index Number P1 225 P2 252 P3 262 P4 267

12%; 3.97%; 1.91%​ The equation for calculating the inflation rate is: (Index in new period- Index in previous period)/Index in previous period×100=Inflation rate

True or false? The CPI can be used to measure the inflation rate?

True As a matter of fact, the most commonly cited measure of inflation in the United States is the Consumer Price Index (CPI).

Inflation is a general and ongoing _____________ in the _______________ in an entire economy. Select from the following choices that properly fill in the blanks. rise; output fall; output rise; level of prices fall; level of prices

rise; level of prices Inflation is a general and ongoing rise in the level of prices in an entire economy. Inflation does not refer to a change in relative prices. A relative price change occurs when you see that the price of tuition has risen, but the price of laptops has fallen. Inflation, on the other hand, means that there is pressure for prices to rise in most markets in the economy.


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