* Suppose OPEC succeeds in raising world oil prices by 300 percent. This price increase causesinventors to look at alternative sources of fuel for internal-combustion engines. A hydrogenpowered engine is developed which is cheaper to operate than gasoline engines. Which problein the construction of the CPI does this situation represent?a. Introduction of new goods and unmeasured quality changeb. Substitution bias and unmeasured quality changec. Substitution bias and introduction of new goodsd. Income bias and substitution bias

CPI or consumer's price index measures the average change in prices paid by consumers for a…

Answered: * Suppose OPEC succeeds in raising…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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.
Does the CPI’s use of a representative basket of goods imply that the CPI will accurately measure the inflation rate of both someone who buys gasoline and someone who buys subway tickets? A. yes B. no
The cost of a gallon of gasoline was $0.57 in 1975. If the cost of gasoline grew with inflation what would the cost be in 2021? How does this compare this to the actual cost of gasoline in 2021? Explain your answer using a meaningful sentence. CPI in 1975 was 53.8 CPI in 2021 was 270.97
Suppose that in March 2012, Japan's CPI was equal to 1150 and the CPI in the US was also equal to 1150. Which of the following conclusions is correct? Select one: a. Prices in Japan and the US are the same. b. The inflation rate in Japan and the US are the same. c. Prices have increased by 15 percent since the base period in both countries. d. None of the above can be concluded.
8. Suppose that Apple Inc. manufactures a new generation of iPhones that can ascertain whether your interlocutor is lying. Assuming that the price of this good will be higher than that of the currently marketed iPhone, comment on the CPI's capability to correctly measure the corresponding change in the cost of living.
Suppose that the typical consumer’s consumption basket changes in 2020, so that he consumes 50g of cocaine, 20 oz of silver, and only 100 memes. What does this imply about the official CPI statistics in 2020, which are based on the 2017 basket of goods? (A) Commodity substitution bias: the official CPI overstates the extent of inflation. (B) Unmeasured quality change: the official CPI overstates the extent of inflation. (C) Commodity substitution bias: the official CPI understates the extent of inflation. (D) Unmeasured quality change: the official CPI understates the extent of inflation.
If P is the price index. How can you estimate the inflation rate? (Multiple answers may be right.) Select an answer and submit. For keyboard navigation, use the up/down arrow keys to select an answer. a Inflationt-Pt-Pt-1/Pt Inflation=(Pt-Pt-1)/Pt-1 Inflation=Pt-Pt-1-1 Inflation=Pt/Pt-1-1
A) Inflation is the steady and widespread increase in prices. The inflation rate, measured by CPI, rose .1% in May (since April) and rose a total of 4% year-over-year (May 2022 to May 2023). Read the BLS report on the Consumer Price Index and identify an “item” or “all items” and begin to consider why the price increased. Do a news search or using (clear, logical, rational) reasoning explain whether prices are increasing because demand increased or because supply decreased. Graph and explain your answer
please do all question answer And don,t do incorrect answer: Calculate the CPI of 2009. Calculate the inflation rate of 2009. If your salary in 2008 and 2009 was same, comment on your standard of living in these two years. If the bank interest rate was 9% in 2009, what was the real interest rate in 2009?
What information is given by the CPI? The CPI tells us _______. A. the price level in a given period expressed as a percentage of the price level in the base period, which equals zero B. the price level in a given period expressed as a percentage of the price level in the base period, which equals 100 C. the inflation rate in a given period compared to the inflation rate in the base period, which equals 100 D. the inflation rate in a given period compared to the inflation rate in the base period, which equals zero

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