Question 3 The "introduction of new goods" bias in the consumer price index refers to the idea that the introduction of new goods increases the value of each dollar; and since the CPI basket is adjusted infrequently it over- estimates the true cost of living for consumers. O consumers prefer new goods, even if they are worse in quality than old goods, and this causes the CPI to underestimate the true cost of living for consumers. O consumers switch to old goods when the prices of new goods increase; therefore, the CPI underestimates the true cost of living for consumers. O consumers switch to new goods when the prices of old goods increase, therefor the CPI over-estimates the true cost of living for consumers. Question 4 All else constant, a fall in the rate of saving leads to a O fall in current consumption and a fall in future production. O rise in current consumption and a fall in future production. O fall in current consumption and a rise in future production. O rise in current consumption and a rise in future production.

Question 3 The "introduction of new goods" bias in the consumer price index refers to the idea that the introduction of new goods increases the value of each dollar; and since the CPI basket is adjusted infrequently it over- estimates the true cost of living for consumers. O consumers prefer new goods, even if they are worse in quality than old goods, and this causes the CPI to underestimate the true cost of living for consumers. O consumers switch to old goods when the prices of new goods increase; therefore, the CPI underestimates the true cost of living for consumers. O consumers switch to new goods when the prices of old goods increase, therefor the CPI over-estimates the true cost of living for consumers. Question 4 All else constant, a fall in the rate of saving leads to a O fall in current consumption and a fall in future production. O rise in current consumption and a fall in future production. O fall in current consumption and a rise in future production. O rise in current consumption and a rise in future production.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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* Suppose OPEC succeeds in raising world oil prices by 300 percent. This price increase causes inventors to look at alternative sources of fuel for internal-combustion engines. A hydrogen powered engine is developed which is cheaper to operate than gasoline engines. Which proble in the construction of the CPI does this situation represent? a. Introduction of new goods and unmeasured quality change b. Substitution bias and unmeasured quality change c. Substitution bias and introduction of new goods d. Income bias and substitution bias
Solve both sub parts
A typical family on Sandy Island consumes only juice and cloth. Last year, which was the base year, the family spent $40 on juice and $20 on cloth. In the base year, juice was $4 a bottle and cloth was $5 a length. This year, juice is $8 a bottle and cloth is $2.5 a length. Calculate a. The CPI basket. b. The CPI in the current year. c. The inflation rate in the current year. I'm not sure if the final answer is 50 or -50, please help by showing the steps. Don't answer by pen paper and don't use chatgpt otherwise we will give dounvote
Commodity substitution bias _______ when the CPI is calculated in 2021 using the 2020 market basket because _______. A. exists; over time preferences change and people prefer to eat pizza rather than pasta B. does not exist; pizza and pasta are not substitutes C. exists; people switch from the relatively more expensive pasta to the relatively less expensive pizza D. does not exist; the CPI market basket is updated frequently to eliminate substitution bias
The table below lists the CPI and wage values for the United States from different decades. a. Complete the table by computing the real income for each year shown in the table. Instructions: Round your answers to two decimal places. Nominal and Real Income see image Instructions: Enter the year using all four numbers (yyyy). b. Of the years listed above, the paycheck of the average worker was highest in ____ . c. Of the years listed above, the purchasing power of the average worker was highest in______ .
QUESTION 19 In an imaginary economy, consumers buy only sandwiches and hamburgers. The typical consumer consumes 10 sandwiches and 6 hamburgers. A sandwich cost $3 in 2020 and $5.40 in 2021. A hamburger cost $5 in 2020 and $6 in 2021. Which of the following statements is correct? When 2007 is chosen as the base year, the inflation rate is 50 percent in 2007 O When 2006 is chosen as the base year, the consumer price index is 90 in 2007. O When 2006 is chosen as the base year, the inflation rate is 150 percent in 2007. When 2006 is chosen as the base year, the inflation rate is 5 percent in 2007 When 2007 is chosen as the base year, the consumer price index is 100 in 2006. O O
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What is the effect of the sources of bias on the CPI calculation? A. Changes in relative prices lead consumers to change the items they buy, and the CPI reflects this substitution. B. The new goods bias injects a downward bias into the CPI. C. When faced with higher prices, people use discount stores more frequently and convenience stores less frequently, but the CPI doesn't include this outlet substitution. D. When the quality of a good improves over time, the CPI doesn't include the portion of the price rise attributable to the higher quality in its calculation.
5. Interest, inflation, and purchasing power Suppose Diamond is a sports fan and buys only football tickets. Diamond deposits $4,000 into a savings account that pays an annual nominal interest rate of 10%. Assume this interest rate is fixed, and so it will not change over time. On the day she makes her deposit, suppose that a football ticket has a price of $20.00. Initially, Diamond's $4,000 deposit has a purchasing power of football tickets. For each of the annual inflation rates given in the following table, first determine the new price of a football ticket, assuming it rises at the rate of inflation. Then enter the corresponding purchasing power of Diamond's deposit after one year in the first row of the table for each inflation rate. Finally, enter the value for the real interest rate at each of the given inflation rates. Hint: Round your answers in the first row down to the nearest football ticket. For example, if you find that the deposit will cover 20.7 football tickets, you…
The goods included in the CPI change as spending habits change. Select one: O True O False
Indicate which one of the following events will affect CPI ONLY. Oa Saudi Arabia successfully developing a vaccine for Covid-19 which is used locally as well as exported to other countries. Ob. There is a decrease in the price of meat imported from Australia. Oc.There is an increase in the price of eggs produced in Saudi Arabia Od. People buying more imported goods without any change in prices O Saudi Arabia changes its base year to 2020
3a. Suppose that the consumer price index was 100 on January 1st, 2000 and 110 on January 1st, 2001. Determine the inflation rate between the two dates. 3b. Ruben earned a salary of $50,000 in 2015 and $60,000 in 2018. The consumer price index was 150 in 2015 and 200 in 2018. What has happened to Ruben's nominal and real income from 2015 to 2018?