Use Table 8P - 5 to calculate core and headline inflation in each time frame relative to the base year, assuming that each category is weighted equally in the calcula tion of headline inflation . [LO 8.2 , 8.4 a. 2012 to a base year . b . 2016 to a base year . . 2012 to 2016.
Use Table 8P - 5 to calculate core and headline inflation in each time frame relative to the base year, assuming that each category is weighted equally in the calcula tion of headline inflation . [LO 8.2 , 8.4 a. 2012 to a base year . b . 2016 to a base year . . 2012 to 2016.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Use Table 8P - 5 to calculate core and headline inflation in each time frame relative to the base year, assuming that each category is weighted equally in the calcula tion of headline inflation . [LO 8.2 , 8.4 a. 2012 to a base year . b . 2016 to a base year . . 2012 to 2016.
Transcribed Image Text:### Median Household Income Growth Analysis
**Scenario Overview:**
The median American household earned $9,387 in 1973 and $53,657 in 2014. During that period, the Consumer Price Index (CPI) rose from 44.4 to 236.7.
**Tasks:**
a. Calculate the total growth rate in nominal median household income from 1973 to 2014.
b. Calculate the total growth rate in real median household income from 1973 to 2014.
---
### TABLE 8P-5: Price Index for Essential Categories
| Year | Food and Energy | Other Goods and Services |
|------|-----------------|--------------------------|
| 2012 | 120 | 102 |
| 2016 | 105 | 107 |
### TABLE 8P-6: Economic Indicators
| Year | GDP Deflator | Change in GDP Deflator | CPI | Change in CPI |
|------|--------------|------------------------|-----|--------------|
| 2012 | 100 | | 100 | |
| 2013 | 105 | | 104 | |
| 2014 | 112 | | 110 | |
| 2015 | 123 | | 113 | |
| 2016 | 137 | | 120 | |
**Explanation:**
- **TABLE 8P-5** details indices for food and energy, and other goods and services.
- **TABLE 8P-6** provides GDP deflator and CPI information over a span of five years, helping understand economic inflation and purchasing power changes.
This information is crucial for analyzing inflation-adjusted income growth and economic health over time.
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