macroeconomics unit 2 lesson 3 I believe
In Felixania, cat food constitutes 45% of the typical basket of goods for a typical consumer, dog food constitutes 3%, and all other goods constitute the remaining 52%. Assume the price of cat food rises by 4%, the price of dog food falls by 10%, and the prices for all other goods remain constant. Based on the information given, we can definitely say:
#1: if consumers get at 4% pay raise, they are better off in terms of their real income compared to inflation as measured by the Felixanian CPI. or #2 the CPI in Felixania is more than in the previous year. (If #2 is given, use that one. If not, use #1)
Let's say a bottle of Dr. Wells (an actual soft drink still available but hard to obtain) cost $0.15 in 1970. If the consumer price index (CPI) in 1970 was 37.8 and the current CPI is 240, then the inflation-adjusted price of Dr. Wells would be (rounded to the nearest penny):
$0.95
Assume you earned $30,000 in 2012, and the CPI in 2013 was 238. How much of a raise did you need, in dollars, to keep up with the change in the inflation rate
$1,044
The movie Jaws grossed $260 million in 1975. What were the gross receipts for Jaws in 2012 dollars
$1,196,000,000
In 1991, the Barenaked Ladies released their hit song "If I Had a Million Dollars." How much money would the group need to have a million dollars' worth of purchasing power in 2012? Note that the consumer price index in 1991 was 136.2 and in 2012 it was 230.0.
$1,688,693.10
A loaf of bread cost $0.18 in 1955 and the CPI was 26.8. The CPI in 2013 was 233. The cost of a loaf of bread in 1955 using 2013 dollars would be
$1.56
Let's say you plan to retire 40 years from now, and you decide you could live on $40,000 per year if you retired today. If the inflation rate is 3% between now and your retirement date, how much money per year would you need to have saved
$130,400
The table shown here gives a cost-of-living index for 14 different cities. If you are living and working in Phoenix and earning $100,700 per year, to have the same standard of living in Manhattan you would need
$216,700
Donna Newton made $0.30 per hour in 1946 at a small restaurant in Clearfield, Pennsylvania. If the consumer price index (CPI) was 18.3 in 1946 and 202.4 in 2011, then Donna`s inflation-adjusted wage would be:
$3.32
McDonald's charged $4.33 for its Big Mac burger in 2012. If the CPI in 2012 was 229 and the CPI in 2002 was 180, then how much would you have paid for the Big Mac back in 2002
$3.40
A movie ticket cost $0.75 in 1960. If movie tickets increased at the same rate as overall inflation, how much would the same movie ticket cost in 2012 dollars, if the CPI was 30 in 1960 and 230 in 2012
$5.75
The percentage change in any economic variable, including the consumer price index (CPI), is measured by which equation?
(Current Year Previous Year / Previous Year) 100.
If healthcare costs make up 8% of total expenditures and they rise by 15% while the other components in the consumer price index remain constant, by how much will the price index rise
1.2%
The value of the consumer price index (CPI) in 2011 was 229 compared to the base period's, which will always have the value of
100
The value of the consumer price index (CPI) in 2011 was 229 compared to the base period, which will always have the value of:
100
Suppose that the consumer price index of a country was 160 at Year X and 164 at the end of Year Y. What was the country`s inflation rate during Year Y?
2.5%
In which year did deflation occur
2009
It is rare when prices fall in modern times. However, it is likely that they would fall during severe recessions. What year is the most likely for this to have occurred
2009
It is rare when prices fall in modern times. However, it is likely that they would fall during severe recessions. What year is the most likely for this to have occurred?
2009
As presented in the table, the approximate rate of inflation (or deflation) from 2000-2001 was (rounded to the nearest percent):
21%
Education typically composes about
3% of the CPI
Education typically composes about:
3% of the CPI
What percentage of consumers' income was spent on fuels and utilities in December 2012?
5.3%
What was the rate of inflation from 1985 to 1995
50%
What was the rate of inflation from 1985 to 1995?
50%
As presented in the table, the rate of inflation (or deflation) from 2001-2002 was (rounded to two decimal places):
6.67%
Medical care typically composes ____ of the typical consumer price index (CPI)
7%
Refer to the table below. This country produces only two goods CDs and books. You are told that the CPI for this country in 2012 was 141. If the base year is 2011, how many books should be present in the basket of goods and services that was used to calculate the CPI of 2012
78
As presented in the table, the rate of inflation from 1999-2000 (i.e., during the year 2000) was (rounded to two decimal places):
8.75%
The Bureau of Labor Statistics reported the consumer price index as 211.4 in December 2007, and 231.1 in December 2012. By what percentage did the index increase from the end of 2007 to the end of 2012 (rounded to one decimal place)
9.3%
Consider a nation in which the price index last year was 130 and this year it is 150. Which statement is correct?
Inflation was 38% this year
Which of the following reflects a practical example of the price confusion problem?
It is difficult for you to determine whether the long lines at your coffee shop are due to increased demand or because inflation has created too many dollars chasing too few goods.
Michael Chang buys only tennis rackets during a particular year. During the year in question, the price of all goods rises by 10% on average, but the price of tennis rackets remains the same. Michael also receives a pay increase based on inflation. Which statement is correct
Michael benefits from inflation
Michael Chang buys only tennis rackets during a particular year. During the year in question, the price of all goods rises by 10% on average, but the price of tennis rackets remains the same. Which statement is correct?
Michael does not experience inflation because he only buys tennis racquets.
How do you convert a price of a good from an earlier time into today`s price?
Take the earlier price and multiply by the ration of today's CPI to the earlier CPI.
What is the consumer price index (CPI)
The CPI is a measure of the price level based on the consumption patterns of a typical consumer
If people bought the same market basket of goods as the average consumer again and again:
The consumer price index (CPI) would be extremely accurate.
Inflation is occurring in a nation; the implication(s) of this is/are:
holding nominal wages constant, the real wage would fall.
Typically the largest percentage category in the consumer price index (CPI) is
housing
Typically the largest percentage category in the consumer price index (CPI) is:
housing
According to the March 2012 consumer price index (CPI), the top three consumer expenditure categories are, respectively
housing, transportation, and food and beverages
According to the March 2012 consumer price index (CPI), the top three consumer expenditure categories are, respectively:
housing, transportation, and food and beverages.
It has been shown that increases in the money supply are directly related to the rate of inflation. If the previous statement is true, then:
hyperinflation will normally be associated with large increases in the money supply.
Oranges become more expensive in 2008 at Ukrop's in Charlottesville, Virginia. This means
the CPI might rise or fall and the price of oranges at Ukrop's could make a very small difference in the CPI if oranges at Ukrop's are included. However, oranges would be a relatively small portion of the entire CPI, if they are included in it at all
Three accuracy problems with the consumer price index (CPI) are:
substitution, quality changes, and the availability of new goods and services.
The agency that measures the consumer price index (CPI) in the United States is
the Bureau of Labor Statistics
The agency that measures the consumer price index (CPI) in the United States is:
the Bureau of Labor Statistics
You know that the consumer price index (CPI) at the beginning of this year was 250 and the rate of inflation was 14%; this would mean:
the CPI at the end of the year was 285.
In Bovania, cattle compose 48% of the consumer price index (CPI), housing composes 32%, and entertainment accounts for the remaining 20%. If, in a certain year, the price of cattle rises by 30% and the price of housing rises by 25%, then:
the CPI has increased, even if the entertainment in the next year is free.
In Bovania, milk constitutes 56% of the typical basket of goods for a typical consumer. Let's say the price of milk rises by 4% and the prices of all other goods fall by 10%. Based on the information given, we can definitely say
the CPI in Bovania is less than in the previous year
Chicken becomes more expensive in 2008 at Wegmans in State College, Pennsylvania. This means
the CPI might rise or fall and the price of chicken at Wegmans could make a very small difference in the CPI if chicken at Wegmans is included in the index. However, chicken would be a relatively small portion of the entire CPI if it is included at all
If cheeseburgers become more expensive and consumers switch their purchases away from cheeseburgers but the consumer price index (CPI) still assumes they buy the same amount, then:
the CPI will reflect upward bias.
Suppose a basket of goods and services has been selected to calculate the consumer price index (CPI) and 2002 has been chosen as the base year. In 2002, the basket's cost was $76.00; in 2004, the basket's cost was $79.50; and in 2006, the basket's cost was $85.00. The value of the CPI was
100 in 2002
Suppose a basket of goods and services has been selected to calculate the consumer price index (CPI) and 2002 has been chosen as the base year. In 2002, the basket`s cost was $76.00; in 2004, the basket`s cost was $79.50; and in 2006, the basket`s cost was $85.00. The value of the CPI was:
100 in 2002
In December 2012, what percentage of a typical consumer's income was spent on consumer goods and services found in the CPI
100%
Suppose a basket of goods and services has been selected to calculate the consumer price index (CPI) and 2002 has been selected as the base year. In 2002, the basket's cost was $600; in 2004, the basket's cost was $650; and in 2006, the basket's cost was $700. The value of the CPI in 2004 was (round to one decimal place)
108.3
Suppose a basket of goods and services has been selected to calculate the consumer price index (CPI) and 2002 has been selected as the base year. In 2002, the basket`s cost was $600; in 2004, the basket`s cost was $650; and in 2006, the basket`s cost was $700. The value of the CPI in 2004 was (round to one decimal place):
108.3
If the CPI today is 230, then the inflation rate since the base year is
130%
Based on the figure, and if we define inflation as being under control at rates less than 10%, when was inflation under control?
1997-2003, 2005-2011
According to the consumer price index (CPI), in a particular year, the price of gasoline rises in the United States by 22%; simultaneously, the price of all food items falls by 8%. Which statement is correct?
Based solely on the information given, we cannot conclude what happened to the CPI.
We pay higher prices for TVs today than people used to pay 10 years ago. This is due to
Both a and b (a) inflation (b) a premium that we have to pay for the improved quality of the TVs that we buy today
Jennifer earns $50,000 in her first job today while her mom used to make $15,000 in her first job in 1975. Jennifer is of the opinion that she makes more than her mom would have made if she started working today, while her mom thinks Jennifer would have earned less than she did had she started working in 1975. If the CPI today is 212 and the CPI in 1975 was 82, then
Both b and d. (b)Jennifer is correct because her mom's salary in today's dollars would be $38,780. (d)Jennifer's mom is wrong because Jennifer's salary in 1975 dollar would have been $19,340.
In Country Z, the prices of goods are measured on an annual basis on the last day of the year. In Country Y, the prices of goods are measured on a weekly basis every Wednesday. Comparing the two countries based on this information
Country Y more accurately combats the upward bias of its price index by using a chained index
Consider a nation in which the price index was 150 last year and this year it is 130. Which statement is correct?
Deflation was 13.33% this year.
Donna Newton made $0.30 per hour in 1946 at a small restaurant in Clearfield, Pennsylvania. If the consumer price index (CPI) was 18.3 in 1946 and 202.4 in 2011 and the legal minimum wage in 2011 was $7.25, then:
Donna`s inflation-adjusted wage would be less than the legal minimum wage in 2011.
According to the textbook, the top-grossing movie of all time (adjusted for inflation) is
Gone with the Wind
According to the textbook, the top-grossing movie of all time (adjusted for inflation) is:
Gone with the Wind
What is the difference between the consumer price index (CPI) and the gross domestic product (GDP) deflator?
If we want to examine how price changes affect the overall economy, the GDP deflator is the better measure.
Your nominal wage increases by 10%, and the overall price level increases by 12%. Which statement is correct?
If you feel richer, you are experiencing money illusion.
In Nation A, the price index rises from 110 to 120 in a particular year. In the same year, the price level rises from 120 to 130 in Nation B. This means
Nation A is experiencing inflation of less than 9.3% and Nation B is experiencing inflation of less than 8.5%
In Nation A, the price index rises from 110 to 120 in a particular year. In the same year, the price level rises from 120 to 130 in Nation B. This means:
Nation A is experiencing inflation of less than 9.3% and Nation B is experiencing inflation of less than 8.5%.
If Robert was earning $10,000 and now earns $11,500, then:
Robert could suffer from money illusion if prices increase by 15% or more.
Which statement best represents the purpose for measuring annual inflation (or deflation)?
The main purpose is to find out whether the overall cost of living has changed
You own a store and have not raised prices recently and now your store has more customers. Which statement is correct?
This can be troublesome because you face a price confusion problem: You don`t know if the extra business means that you should open another store, or if the crowds are a result of inflation, which has caused all consumers to buy at a faster rate.
If your boss calls you into her office and offers you a promotion, which will include a 5% pay increase, how would you evaluate the value of your raise?
Very good, since the rate of inflation is 1%
Based on the weight of the consumer price index (CPI), the price of rental housing increases by 15% and that of owned housing by 5%. During the same year, the price of gasoline falls by 22%. We can say that:
all other factors being constant, it is likely the CPI would rise during the year in question.
Gas prices typically rise every summer as more people travel during the summer months. If the economy is in a recession and your friend tells you that gas prices are still rising during the summer months, which of the following is true
Your friend is correct, since gas prices can be increasing due to inflation
The chained consumer price index (CPI) tends to be:
a better measure of prices than the traditional CPI, no matter what the circumstances
The price of a McDonald's hamburger in 1955 was $0.15 when the price index was 27; if in 2011, it was $0.89 when the price index was 220, then the inflation-adjusted price of a McDonald's hamburger in 2011 was
a bit higher than 2011's actual price (1-1.99 times as much)
The price of a McDonald`s hamburger in 1955 was $0.15 when the price index was 27; if in 2011, it was $0.89 when the price index was 220, then the inflation-adjusted price of a McDonald`s hamburger in 2011 was:
a bit higher than 2011`s actual price (1-1.99 times as much).
If the price index in 1922 was 17 and a unit of Nabisco Oreo cookies cost $0.32, and if the price index today is 220 and a unit of Nabisco Oreo cookies costs $2.99, then the inflation-adjusted price of Oreos is
a bit higher than today's actual price (1-1.99 times as much)
From 1960 until 2012, the long-run average rate of inflation in the United States was
about 4%
In 1940 you could buy a "nickel Pepsi" for (oddly enough) a nickel. If the price index in 1940 was 14 and the 2011 price index was 221, then the inflation-adjusted price of a Pepsi would be
about 79 cents ($0.79)
In 1940 you could buy a "nickel Pepsi" for (oddly enough) a nickel. If the price index in 1940 was 14 and the 2011 price index was 221, then the inflation-adjusted price of a Pepsi would be:
about 79 cents ($0.79)
Say consumers buy two kinds of meat, beef and pork. If the price of pork doesn't change and the price of beef rises over time, then consumers will typically buy more pork and less beef. If the Bureau of Labor Statistics fails to capture such substitution between goods in the CPI calculation, then this will result in
an overestimation of both the CPI and the inflation rate
Quality changes:
are at least partially adjusted for in the CPI.
Menu costs of inflation:
are best described as the costs firms incur by having to change prices either on paper or in the computer.
The chained consumer price index (CPI) is a better measure of prices than the traditional CPI:
because it adjusts for price changes more often, especially when new goods are introduced, which is important because new products' prices tend to fall soon after introduction.
The housing crisis has some roots in inflation because:
builders confused inflation with an increase in demand and hence overbuilt-a price confusion problem
Typically the consumer price index (CPI) is calculated by:
checking the prices of about 8,000 goods in about 38 locations across the United States.
Assume you received a 4% raise in 2013. In addition, the CPI in 2013 was 240. Your real wage in 2013 ___________
decreased
The rate of inflation ______ between 1980 and 1983
decreased
The signing of long-term wage and price agreements and the relationship to inflation most likely raises the issue of:
future price uncertainty.
You have to pay costs for your business now but you also have to enter into long-term contracts to repay loans in the future. If inflation occurs, the best term for the problem that occurs in this case is:
future price uncertainty.
The chained consumer price index (CPI) is a/an:
geometric average of the prices of the typical consumer market basket
According to the figure, deflation was occurring:
in none of the years shown
Wages are often tied to expected rates of inflation; thus one reason why inflation is important is that:
inflation creates uncertainty about costs and prices, which affects both employees and employers.
If 51% of all goods in the consumer price index (CPI) became more expensive and 49% became cheaper
inflation or deflation could occur, depending on the weight of these goods in the basket of goods and the actual percent changes
Referring to the figure, we can observe that:
inflation seemes to stabalize in the early years, 1996 and 1999, but it then spiked between 2002 and 2004
The concept of a price index is that:
it is a measure of how the prices included in the typical basket of goods have changed over time, holding the items in the consumption bundle constant.
If everyone buys the same goods every year and the price of housing rises by 38%:
it is not possible to tell what happened to the CPI because other than for housing, we do not know what happened to the prices of any of the other goods.
Joe Kowalski invents a new product, and this new product becomes cheaper over time. This can be problematic because
it is unlikely the CPI will include Joe's new product immediately, even if it is a consumer good
Joe Kowalski invents a new product, and this new product becomes cheaper over time. This can be problematic because:
it is unlikely the CPI will include Joe`s new product immediately, even if it is a consumer good.
In the 1970s, the government attempted to regulate prices to control inflation; this attempt was unsuccessful. The most likely reason was that:
it removed relative price signals for those items that had actual increases in demand that were not due to inflation.
As a business owner, you find that your resource prices are increasing often. Because these costs are rising, you find it necessary to change your prices frequently. This best describes
menu costs
As a business owner, you find that your resource prices are increasing often. Because these costs are rising, you find it necessary to change your prices frequently. This best describes:
menu costs.
You get a pay raise and feel richer even though your raise did not keep up with inflation; this is best described as:
money illusion
The Bureau of Labor Statistics releases consumer price index (CPI) data
monthly
If real income increases, then:
nominal income rises faster than prices.
Milton Friedman, who won the Nobel Prize in Economics, characterized inflation as being "high and variable." These characteristics of inflation create problems because
of future price uncertainty
The distinction between price confusion problems and menu costs is that:
price confusion results from confusion between relative demand and inflationary pressures, whereas menu costs relate to producers changing prices, typically during inflationary periods.
The textbook shows that the inflation-adjusted movie receipts for Star Wars (released 1977) were $1,410,707,000 and the original receipts were $460,998,000. The implication is that:
prices today are about 33% of what they were in 1977.
The textbook shows that the inflation-adjusted movie receipts for Star Wars (released 1977) were $1,410,707,000 and the original receipts were $460,998,000. The implication is that
prices today are about three times what they were in 1977
According to the textbook, the fully completed house that one could buy from the Sears catalog in 1924 would be
quite a good deal, even when adjusting for inflation
Inflation in Zimbabwe
reached the rate of 80 billion percent per month
If nominal income increases, then:
real income increases if the price index falls.
Inflation creates uncertainty because:
real interest rates, prices, and wages are unknown.
If the price of a typical market basket of goods increased from about $20 in 1960 to $200 in early 2012, then it
rose by 10-fold from 1960 until early 2012.
If the price of industrial plastic injection molding machines rose by 20% and the price of oranges fell by 20%, then:
the CPI would fall by the weighted value of oranges in the CPI, but because industrial plastic injection molding machines are not a consumer good, they would not affect the CPI.
One improvement of the chained consumer price index (CPI) over the traditional CPI is that
the chained CPI more quickly takes into account new goods
In Bovania, milk constitutes 56% of the typical basket of goods for a typical consumer. Let`s say the price of milk rises by 7% and the prices of all other goods fall by 4%. Based on the information given, we can definitely say:
the consumer price index (CPI) in Bovania is greater than in the previous year.
If people bought the same market basket of goods as the average consumer again and again
the consumer price index (CPI) would be extremely accurate
In a particular nation, people buy a completely unique and different set of goods and services every year. None of the goods purchased in the new year are the same as any of the goods purchased in the previous year. Based on this information
the consumer price index (CPI) would be meaningless in this nation.
If housing prices increase by 25% and the price of all other goods decreases by 22%, then
the consumer price index (CPI) would definitely fall during the year in question because housing prices do not constitute the majority of the CPI
If housing prices increase by 25% and the price of all other goods decreases by 22%, then:
the consumer price index (CPI) would definitely fall during the year in question because housing prices do not constitute the majority of the CPI.
The value of the consumer price index (CPI) is best described as
the current year prices to base year prices, holding the market basket content constant.
A price confusion problem is best described as:
the difficulty producers have in determining whether higher prices are due to increased demand or inflation.
If a Hershey`s chocolate bar cost $0.05 in 1921 when the price index was 18 and the same size and weight Hershey`s chocolate bar cost $0.05 in 1955 when the price index was 27, then:
the inflation-adjusted price of the bar would be much higher than the actual price for both years.
According to the price confusion problem, if the price of a product increases, then:
the market demand has increased, and the firm`s output should increase.
If your real wage rose but your nominal wage fell, this would imply that:
the overall price level has fallen more than your nominal wage
Inflation necessarily occurs when:
the overall price level, such as the consumer price index (CPI), rises.
Assume the price of salt increased from $0.30 in 1985 to $0.50 in 1995. If we calculate the average rate of price increase for salt over this period, we could accurately say
the price of salt increased at about a 5% rate per year during this period
Assume the price of salt increased from $0.30 in 1985 to $0.50 in 1995. If we calculate the average rate of price increase for salt over this period, we could accurately say:
the price of salt increased at about a 5% rate per year during this period.
Typically if real wages fall, the quantity demanded of labor rises. If workers agree to 3% wage increases for a four-year period and inflation is more than 3%, then, based on this information alone:
the quantity demanded of labor will increase, because real wages fell.
Inflation can create uncertainty by making:
the real value of future payments uncertain.
If the value of the consumer price index (CPI) in 2013 was 135 and the value of the CPI in 2012 was 117, we could correctly say that
the typical basket of goods was about 15.4% more expensive in 2013 than in 2012
If the consumer price index (CPI) was 100 in the period of 1982-1984, then
this period was the base period
If the goods producers buy change dramatically between years, then:
this would be reflected in the GDP deflator but not the CPI.
Tofu becomes more expensive in 2008 at Safeway/Vons in Laguna Nigel, California. This means:
tofu, even if included in the CPI in 2008, would make a small difference on the average weighted price of food and beverages. Food and beverages only constitute a small portion of the CPI, and hence, this would be unlikely to affect the overall CPI by any significant amount.
Assume tuition at Houston Community College cost $588 (per semester) in 2004 and $813 in 2012. If the price index was 184 in 2004 and 226 in 2012, then we could say
tuition has increased more rapidly than inflation
Assume tuition and fees at North Carolina State University cost $4,259 in 2004 and $7,787 in 2012. If the price index was 184 in 2004 and 226 in 2012, then we could say:
tuition has increased more rapidly than inflation.
Assume tuition at Penn State cost $6,142 (per semester) in 2007 and $7,562 in 2012. If the price index was 207.34 in 2007 and 226 in 2012, then we could say:
tuition has increased more rapidly than inflation.
Assume tuition at the University of Virginia cost $2,962 (per semester) in 2004 and $11,584 in 2012. If the price index was 184 in 2004 and 226 in 2012, then we could say:
tuition has increased much more rapidly than inflation.
Deflation is best described as
when the overall level of prices of goods falls
Inflation occurs:
when the overall level of prices rises
Deflation is best described as:
when the overall prices of goods falls
Deflation:
will make you better off if your nominal wages fall more slowly than prices.
The ratio of Price in an Earlier Time / Price in Today's Time
would be used to convert today's price to an earlier price adjusting for inflation
The ratio of Price in an Earlier Time / Price in Today`s Time:
would be used to convert today`s price to an earlier price adjusting for inflation.
Let's say a company invents a very popular device called a Zorgon, which allows you to send small items via a transporter from one place to another. This would affect the consumer price index (CPI) in the sense that the CPI
would fail to include purchases of the Zorgon for some period of time after the product entered the market
Deflation
would negatively affect producers but positively affect consumers because producers must accept lower prices
Deflation:
would negatively affect producers but positively affect consumers because producers must accept lower prices
The website that provides official inflation statistics is
www.bls.gov.
If your nominal wage rises but you think that it automatically means your real wage rose, then:
you are suffering from money illusion.
You are offered two jobs, one in Chicago paying $67,000 and one in Dallas paying $58,000. The price index in Chicago is 110.8, and in Dallas it is 91.5. If real wages are the only consideration, then:
you would definitely take the job in Dallas because the real wage is higher there.
You are offered two jobs, one in Chicago paying $67,000 and one in Philadelphia paying $79,000. The price index in Chicago is 110.8, and in Philadelphia it is 126.5. If real wages are the only consideration, then:
you would definitely take the job in Philadelphia because the real wage is higher there.
Your entertainment price index (EPI) was computed based on three goods: movie tickets, popcorn, and limeade. If you change the quantity of these goods from this year to next year and the prices of two of the three goods increase while the other price falls, then:
your EPI might rise or fall, contingent only on the percentage of the market basket that these goods constituted and the percentage that each good occupied within the basket, regardless of the quantity change from year to year.
Your firm expands its output in a time when demand appears to be increasing. Demand for all goods is increasing because of inflation, and consumers want to buy all goods faster because their real purchasing power is falling due to inflation. This situation could indicate that:
your firm experienced a price confusion problem.
In Las Vegas, the cost of living index is 110, and in San Francisco, it is 170. You work in Las Vegas currently and your salary is $57,000. You are offered a promotion and pay raise of $70,000 to move to San Francisco. If you take the promotion
your nominal wage increased but your real wage has decreased
In Las Vegas, the cost of living index is 110, and in San Francisco, it is 170. You work in Las Vegas currently and your salary is $57,000. You are offered a promotion and pay raise of $70,000 to move to San Francisco. If you take the promotion:
your nominal wage increased but your real wage has decreased.
Usually in the United States and other advanced economies
your nominal wage is more than your real wage
