EBK ESSENTIALS OF ECONOMICS
8th Edition
ISBN: 8220103599832
Author: Mankiw
Publisher: Cengage Learning US
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Question
Chapter 16, Problem 3CQQ
To determine
Theprice hike and its affect on
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Price (2011) Quantity (2012)
$5.00
$6.00
Item
Quantity (2011)
Price (2012)
Magazines
450
200
$4.50
$8.00
$10.50
400
Movie tickets
50
Pizzas
100
$10.00
120
The data in the table above shows the consumption by families in an economy. The year 2011 is the reference base period.
Based on the table above, the CPI for 2012 is
A. 105.1.
B. 5.0 percent.
C. 102.5.
O D. 100.
O E. 98.5.
If a Pennsylvania gun manufacturer raises the priceof rifles it sells to the U.S. Army, its price hikes willincreasea. both the CPI and the GDP deflator.b. neither the CPI nor the GDP deflator.c. the CPI but not the GDP deflator.d. the GDP deflator but not the CPI.
What is the relationship between real GDP and CPI
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- Explain what is the difference between CPI and GDP deflator?arrow_forwardThe table shows the cost of a fixed basket of goods that a typical urban consumer would buy in the economy of Kindleberger. The base period for the consumer price index (CPI) is the year 2000. Please specify answers to two decimal places. Year Cost of a basket of goods 2000 $5,150.00 2011 $4,500.00 2012 $7,725.00 What is the CPI for 2000? CPI for 2000: What is the CPI for 2011? CPI for 2011: What is the CPI for 2012? CPI for 2012:arrow_forwardThe table below shows some data I got from FRED on the CPI and PCE deflator. The PCE deflator is a price index similar to the GDP deflator but only uses the consumption ("personal consumption expenditures") part of the GDP data. Year CPI PCE deflator 1989 123.94 60.69 2001 177.04 79.74 2020 258.84 111.15 You were probably born around 2001 so calculate the annualized inflation rate based on the CPI between 2001 and 2020. Repeat to find the annualized inflation using the PCE deflator between 2001 and 2020. The gives a higher inflation rate O PCE, and its noticeably higher (over 0.5 percentage points) PCE, but its not that different from the CPI inflation rate (difference is under 0.5 percentage points) CPI, and its noticeably higher (over 0.5 percentage points) CPI, but its not that different from the CPI inflation rate (difference is under 0.5 percentage points)arrow_forward
- In a simple economy, people consume only two goods: food and clothing. The market basket of goods used to compute the CPI has 50 units of food and 10 units of clothing. Food Clothing Last year's price $4 $8 This year's price $6 $16 a. What are the percentage increases in the price of food and in the price of clothing? b. What is the percentage increase in the CPI? c. Do these price changes affect all consumers to the same extent? Explainarrow_forwardThe market basket used to calculate the CPI in Aquilonia is 4 loaves of bread, 6 gallons of milk, 2 shirts, and 2 pairs of pants. In 2005, bread cost $1.00 per loaf, milk cost $1.50 per gallon, shirts cost $6.00 each, and pants cost $10.00 per pair. In 2006, bread cost $1.50 per loaf, milk cost $2.00 per gallon, shirts cost $7.00 each, and pants cost $12.00 per pair. Using 2005 as the base year, what was Aquilonia’s inflation rate in 2006? This question is stumping me. I thought that this answer was 124.4 but it seems that it is 24.4. I cant figure it outarrow_forwardWhat is the main reason why GDP deflator and CPI differ from each other? A) CPI includes investments, while GDP deflator doesn’t B) CPI includes durable goods, while GDP deflator doesn’t C) GDP deflator includes exports, but not imports D) CPI includes exports, but not importsarrow_forward
- Explain the difference between GDP Deflator and Consumer Price Index. And explain problems in computing the CPI!arrow_forwardDescribe how the CPI is calculated. How might the CPI overstate the true increase in cost of living?arrow_forwardexplain four main differences between the GDP Deflator and CPI, with one example for each difference.arrow_forward
- Consider the following basket of student essentials: 2019 2020 Burritos $6.30 $6.60 Pizzas $9.90 $10.00 Movie Tickets $10.00 $10.50 Energy Drinks $4.99 $5.99 a. Using 2019 as the base year, what is the CPI in 2019? b. Assume students buy 30 burritos, 25 pizzas, 15 movie tickets, and 200 energy drinks each year. What is the CPI in 2020 using 2019 as a base year? What is the inflation rate? Would this rate be higher or lower if students bought more energy drinks?arrow_forwardIn a simple economy, people consume only two goods: food and clothing. The market basket of goods used to compute the CPI has 40 units of food and 20 units of clothing. Food Clothing Last year's price $10 $ 18 This year's price $14 $21 a) What are the percentage increases in the price of food? Number b) What are the percentage increases in the price of clothing? Number c) What is the percentage increase in the CPI? Numberarrow_forwardWhich goods are supposed to be included in the CPI? Group of answer choices All goods and services that typical consumers buy. All goods and services produced in the economy. All goods and services in the consumption component (C) of the GDP. All the goods, but not the services, in the consumption component (C) of the GDP.arrow_forward
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