Spring 2024 Principles of Macro Assignment 8 (CPI)

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Northwest Missouri State University *

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52150

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Economics

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Feb 20, 2024

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Principles of Macro Spring 2024 Name: ______ Katie Schultz _____ Assignment #8 Assignment instructions: Read each question carefully and answer in the space provided. Please highlight your answers or use a different colored font. Show all work where necessary and round answers to the nearest hundredth. Submit your assignment as a Word document attachment through NW Online. Be sure to double check that your assignment is attached properly to your submission! Price of Pizza Price of Movie Ticket Price of Coffee 2021 $10.00 $9.00 $2.00 2022 $10.00 $9.50 $3.00 2023 $11.00 $10.00 $3.00 1. The market basket for a typical consumer includes 3 pizzas, 2 movie tickets, and 5 coffees. The prices of these goods are shown in the table above. The base year is 2022 . Use this information to calculate a) through e) in the table below. Show your work in the second column and provide your answer in the third column. Round your answers to the nearest hundredth (2 decimal places). Work: Answer: a) Calculate the CPI for 2021. ((10x3) + (9x2) + (2x5))= 58 58/64 x 100= 90.625 90.63 b) Calculate the CPI for 2022. CPI is always 100 when being compared to its base year. ((10x3) + (9.50x2) + (3x5)) = 64 64/64 x100 = 100 100 c) Calculate the CPI for 2023. ((11x3) + (10x2) + (3x5)) = 68 68/64 x 100= 106.25 106.25 d) Calculate the inflation rate from 2021 to 2022. ((100- 90.63)/ 100)) x 100 9.37% e) Calculate the inflation rate from 2022 to 2023. ((106.25 – 100)/ 100)) x 100 6.25% 2. The CPI in 2020 was 260.6, and the CPI in 2023 was 306.8. Your nominal income in 2020 was $45,000 , and your nominal income in 2023 was $55,000. Based on your real income , did your income keep up with inflation? a) Show your answer mathematically. Real income 2020= (45,000/260.6) x 100 = 17,267.84 Real income 2023= (55,000/ 306.8) x 100 = 17,926.99 b) Explain your answer. The real income increased meaning that the income did keep up with inflation and purchasing power also increased. 3. The average price of a movie ticket in 1923 was $0.25. The CPI in 1923 was 17.3, and the CPI in 2023 was about 306.8. How does the average price of a movie ticket in 1923 compare to the price of a movie ticket in 2023? a) Show your answer mathematically. Movie Ticket in 2023= 0.25 x (306.8/17.3) = 4.43 b) Explain your answer.

Paying $0.25 for a movie ticket in 1923 is equivalent to paying $4.43 for a movie ticket in 2023. 4. Answer the following questions using the BLS table found here: https://www.bls.gov/news.release/cpi.t02.htm . a) Find 5 specific expenditure categories for which the unadjusted percent change in price between December 2022 to December 2023 is increased by more than 8% (found in the 3 rd column of the table under “Unadjusted percent change; the Dec. 2022-Dec. 2023 column). Fill in the table below with the specific expenditure category and the given unadjusted percent change). The table is big—scroll through the whole thing and find goods or services from different categories that are of interest to you! *Note: The new BLS report will be published on Wednesday, February 13, so if you complete your assignment after the new report is published, please use January 2023 – January 24 data (Jan. 2023 – Jan. 2024 in the BLS provided table). Expenditure Category Unadjusted Percent Change Dec. 2022 – Dec. 2023 (greater than 8%) Food from vending machines and mobile vendors 13.1% Transportation Services 9.7% Motor Vehicle Repair 10.3% Video Discs and Other Media 9.6% Admission to Sporting Events 14.9% b) Find 5 specific expenditure categories for which the unadjusted percent change in price between December 2022 to December 2023 is decreased by more than 8% (again, found in the 3 rd column of the table). Fill in the table below with the specific expenditure category and the given unadjusted percent change Dec. 2022 – Dec. 2023). Again, the table is big—scroll through the whole thing and find goods or services from different categories that are of interest to you! *Note: The new BLS report will be published on Wednesday, February 13, so if you complete your assignment after the new report is published, please use January 2023 – January 24 data (Jan. 2023 – Jan. 2024 in the BLS provided table). Expenditure Category Unadjusted Percent Change Dec. 2022 – Dec. 2023 (negative by more than 8%) Fuel Oil 14.7% Appliances 10.3% Televisions 10.3% Smartphones 14.4% Health Insurance 27.1% 5. Use the BLS inflation calculator ( http://data.bls.gov/cgi-bin/cpicalc.pl ) to fill in the blanks below. Please provide your answers in the right column. Answer: a) Earning $50,000 in December 2000 is equivalent to earning __________ in December 2023. $88,145.40 b) The average price of a new car in December of 1960 was $2,600. This is equivalent to us paying __________ in December of 2023. $26,763.07 c) Having $5,000 in December of 1913 is equivalent to having __________ in December of 2023. $153373 d) Earning $60,000 in December 2023 is equivalent to earning __________ in December of 1980. $16880.42 6. Go to the following website, which provides a cost-of-living index for each state: https://meric.mo.gov/data/cost-living- data-series . Use the 2023 data provided below the map to answer the following questions. Fill in your answers in the right column. Answer: a) Which state has the lowest cost of living? Oklahoma

b) Which state has the highest cost of living? Hawaii c) Where does Missouri rank? Sixth

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