1. Explain the Consumer Price Index (CPI)? 2. Consider an economy that produces and consumes shoes and houses. In the table below are data for two different users. YearYear 2000200Price of a house$120,000$145,000Price of a pair of shoes$150$170Number of houses produced1,0001,050Number of pairs of shoes650,000525,000a. Calculate the CPI for both years.b. (Calculate the rate of inflation for 2001 using the CPI.c. Calculate the GDP deflator for both years.d. Calculate the rate of inflation for 2001 using the GDP deflator.

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ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter6: Tracking The U.s. Economy

Section: Chapter Questions

Problem 4.9P

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1. Explain the Consumer Price Index (CPI)?

2. Consider an economy that produces and consumes shoes and houses. In the table below are data for two different users.

	Year	Year
	2000	200
Price of a house	$120,000	$145,000
Price of a pair of shoes	$150	$170
Number of houses produced	1,000	1,050
Number of pairs of shoes	650,000	525,000

a. Calculate the CPI for both years.

b. (Calculate the rate of inflation for 2001 using the CPI.

c. Calculate the GDP deflator for both years.

d. Calculate the rate of inflation for 2001 using the GDP deflator.

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