Using the table below, find the real value of a payment of $1,000 to be received each year given the following CPI values. Next find theamount that this $1,000 should be adjusted to in order to keep its real value at $1,000.Instructions: Round your answers to two decimal places.YearCPI2015100201610320171052018110Real value of$1,0001,000Cost-of-livingadjusted payment1,000

To calculate the real value of a payment of $1,000 to be received each year and the adjustment…

Answered: Using the table below, find the real…

Economics:

10th Edition

ISBN:9781285859460

Author:BOYES, William

Publisher:BOYES, William

Chapter7: Unemployment And Inflation

Section: Chapter Questions

Problem 7E

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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.
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.
Rosalie the Retiree knows that when she retires in 16 years, her company will give her a one-time payment of 20,000. However, if the inflation rate is 6 per year, how much buying power will that 20,000 have when measured in todays dollars? Hint: Start by calculating the rise in the price level over the 16 years.
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?
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?
Why do you mink the U.S. experience with inflation over the last 50 years has been so much milder than in many other countries?
Construct the price index for a fruit basket in each year using 2003 as the base year.
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.
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 CPI to convert from nominal to real would be more appropriate man using the GDP deflate:
Compute the inflation rate for fruit prices from 2001 to 2004.
What is the difference between the price level and the tale of inflation?

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