Which of the following is a reason why the Traditional CPI overstates the true price level? A) The Traditional CPI does not include goods that are imported. B) The Traditional CPI does not regularly account for improvements in the quality of various goods. C) The Traditional CPI does not consider investment and capital equipment goods. D) The Traditional CPI is reported on a monthly basis which is too infrequent for the BLS to provide an accurate measure of the price level.

Which of the following is a reason why the Traditional CPI overstates the true price level? A) The Traditional CPI does not include goods that are imported. B) The Traditional CPI does not regularly account for improvements in the quality of various goods. C) The Traditional CPI does not consider investment and capital equipment goods. D) The Traditional CPI is reported on a monthly basis which is too infrequent for the BLS to provide an accurate measure of the price level.

MACROECONOMICS FOR TODAY

10th Edition

ISBN:9781337613057

Author:Tucker

Publisher:Tucker

Chapter7: Inflation

Section: Chapter Questions

Problem 19SQ

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Locate an example of the localized Atlanta/Sandy Springs/Roswell CPI that is performing better than the national CPI. State the two numbers you researched--local and national-- and forecast based on the October data how you think the November data will look for both local/national CPIs. Will the local CPI continue to perform better than national? Will it slow down to align with national? Locate an example of the localized Atlanta/Sandy Springs/Roswell CPI that is performing worse than the national CPI. State the two numbers you researched--local and national-- and forecast based on the October data how you think the November data will look for both local/national CPIs. Will the local CPI improve so that it is more in line with the national CPI?
Which of the following was a way for the Bureau of Labor Statistics to reduce the quality/new good bias in its calculation of the CPI? Update the list of products included in the CPI more often and rapidly. Allow for some substitution amongst products. Remove energy and food prices. Automatically reduce the inflation by 0.5% to account for quality/new good bias.
Consumers of the economy purchase all primary products, manufacturing products and services shown in the table. Manufacturing products and services are all produced by the domestic economy. However, for each year, 3/4 of the primary products is imported, and 1/4 is produced domestically. Set 1973 as the base year.Find the % change in prices for primary products, manufacturing products and services, respectively, from 1973 to 1974. Find the CPI for both years. Calculate the corresponding inflation rate from 1973 to 1974. Find the nominal and real GDP for both years. Hence, find the GDP deflator for both years. Calculate the corresponding inflation rate from 1973 to 1974. The above table is set up in such a way to mimic the actual data of the inflation rates calculated from the CPI and the GDP deflator, respectively, for the US during the first oil crisis in 1973- 1974. Use your results to explain how and why the two numbers differ by such a wide margin during that period.
As a result of a drought, prices and produced quantities in a country change as follows: Assume that the economy produces and consumes only the above agricultural products.a) Calculate the nominal GDP and the real GDP for the year 2021 with the base year 2020.b) By how many percent have the prices of goods increased?c) Calculate the CPI for the year 2021 according to Laspeyres and Paasche.d) Describe the general differences between the CPI and the GDP deflator.
In Virtual Reality, time travel became possible only in 3006. Economists in the Statistics Bureau decided to conduct a Consumer Expenditure Survey in 3005. The table shows the results of the survey. It shows the items that consumers buy and their prices. The Statistics Bureau fixes the reference base year as 3005. Calculate the CPI in 3006 and the inflation rate measured by the CPI in 3006. >>> Answer to 1 decimal place. The CPI in 3006 using the 3005 CPI market basket is nothing. The inflation rate in 3006 using the 3005 CPI market basket is nothing percent. 3005 3006 Item Quantity Price Quantity Price Games 20 $40 15 $90 Time travel 0 - 10 $8,000
Which of the following was a way for the Bureau of Labor Statistics to reduce the quality/new good bias in its calculation of the CPI? Remove energy and food prices. Allow for some substitution amongst products. Update the list of products included in the CPI more often and rapidly. Automatically reduce the inflation by 0.5% to account for quality/new good bias.
The Consumer Price Index (CPI) is a measure of the average change in price over time from a designated reference period, at which it equals 100. The index is based on prices of basic consumer goods and services. The table provided lists the CPI for several years from 1960 to 2012. If the price change in cars parallels the change in the CPI, what would a car sell for (to the nearest dollar) in 2012 if a comparable model sold for $7,500 in 1999? Year CPI 1960 29.6 1973 1986 44.4 109.6 156.9 1999 2012 229.6 In 2012, a car would sell for approximately $ 58,176 (Round to the nearest dollar.)
In each of the following cases, explain clearly how the CPI might misrepresent changes in consumer prices (Commodity substitution bias, Introduction of new goods, or Un-measured quality changes). In each case, speculate as to whether CPI overstates or understates consumer expenses. (a) By 1990, expensive personal computers became a common expenditure in consumer baskets. However, some governments were still calculating the consumer’s basket using a 1975 survey. (b) Between 2007 and 2015, there were significant improvements in smartphones. (c) Compared to 1970, households in 2015 took more vacations. (d) Food quality has deteriorated over time, even as consumers purchase the same amount.
The average cell phone from today has many more features than a cell phone from 10 years ago. The increase in prices of cell phones will be improperly picked up by the CPI. This is an example of: quality change bias none of these base year bias substitution bias new goods bias
Suppose that typical CPI basket for consumers contains 3 goods: 5 wheels of cheese, 3 t-shirts, and 10 gallons of gasoline. The prices of the goods in 2019 and 2020 are listed below: Item Prices 2019 Prices 2020 Cheese $5 $10 T-shirt $10 $15 Gallon of Gasoline $3 $6 A) Find the cost of the CPI Basket in 2019: B) Find the cost of the CPI Basket in 2020: C) Using 2019 as the base reference period, calculate the CPI for 2020 D) What is the inflation rate in 2020? E) Suppose that you made $40,000 in 2019 and $41,000 in 2020. What has happened to your real income from 2019 to 2020?
Is the Chain CPI larger than the Traditional CPI? A) The Chain CPI is larger than the Traditional CPI because the Traditional CPI's basket is updated every month. B)The Chain CPI is smaller than the Traditional CPI because the Chain CPI includes the prices of imported goods whereas the Traditional CPI does not. C) The Chain CPI is smaller than the Traditional CPI because the Chain CPI's basket is updated every month. D) The Chain CPI is larger than the Traditional CPI because the Traditional CPI includes the price of imported goods whereas the Chain CPI does not.
One criticism of the CPI is that the market basket used in the CPI may not reflect current spending priorities. Which of the following is an example of this? Personal computers were less powerful in 1982-1984. Cell phones are more commonly purchased today than in 1993-1995. Using extreme couponing methods, a family can save hundreds of dollars a month. Goods cost more in Alaska and Hawaii due to transportation costs.