Back to AssignmentAttemptsAverage / 12. Calculating percentage change in pricesThis table indicates the historical level of the Consumer Price Index (CPI) for the United States for 2016, 2017, and 2018.Complete the table by computing the inflation rate for 2017 and 2018.Year2016CPI240.0Percentage change in prices2017 245.12018 251.1acerGrade It NowSave & ContinueContinue without saving

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Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter7: Unemployment And Inflation

Section: Chapter Questions

Problem 7E

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Go to this website (http://www.measuringworth.com/ppowerus/) for the Purchasing Power Calculator at measuringWorth.com. How much money would it take today to purchase what one dollar would have bought in the year of your birth?
The index number representing the price level changes from 110 to 115 in one year and then from 115 to 120 the next year. Since the index number increases by five each year, is five inflation rate each year? Is the inflation rate the same each year? Explain your answer.
With in 1 or 2 percentage points, what has the U.S. inflation rate been during the last 20 years? Draw a graph to show the data.
How to Measure Changes in the Cost of Living introduced a number of different price indices. Which price index would be best to use to adjust your paycheck for inflation?
Construct the price index for a fruit basket in each year using 2003 as the base year.
The total price of purchasing a basket of goods in the United Kingdom over four years is: year 1=940, year 2=970, year 3=1000, and year 4=1070. Calculate two price indices, one using year 1 as the base year (set equal to 100) and the other using year 4 as the base year (set equal to 100). Then, calculate the inflation rate based on the first price index. If you had used the other price index, would you get a different inflation rate? If you are unsure, do the calculation and find out.
Inflation rates, like most statistics, are imperfect measures. Can you identify some ways that the inflation rate for fruit does not perfectly capture the rising price of fruit?
Table 22.4 shows the fruit prices that the typing college student purchased from 2001 to 2004. What is the amount spent each year on the basket of fruit with the quantities shown in column 2?
Describe a situation, either a government policy situation, an economic problem, or a private sector situation, where using the GDP deflator to convert from nominal to real would be more appropriate than using the CPI.
A fixed-rate mortgage has the same interest rate over the life of the loan, whether the mortgage is for 15 or 30 years. By contrast, an adjustable-rate mortgage changes with market interest rates over the life of the mortgage. If inflation falls unexpectedly by 3, what would likely happen to a homeowner with an adjustable-rate mortgage?
Compute the inflation rate for fruit prices from 2001 to 2004.
What is indexing?

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