EBK ESSENTIALS OF ECONOMICS
7th Edition
ISBN: 8220102452107
Author: Mankiw
Publisher: CENGAGE L
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Chapter 16, Problem 8PA
Subpart (a):
To determine
Social security of elderly consumer.
Subpart (b):
To determine
Explain what would determine elderly consumer better-off.
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Explain using consumer theory why microeconomists believe the traditional CPI is biased. A diagram would help.
Congratulations! Your boss has given you a raise.
However, you want to know whether your purchasing power has increased, since inflation is also rising. The table below gives you data for wages and the Consumer Price Index (CPI) for the last two years.
Wage ($/day)
CPI
Year 1
$ 2000 CPI 120
Year 2
$2200 CPI 129.6
The nominal percentage increase in your wage is
enter your response here%. (Round your answer to one decimal place.)
Part 2
The real percentage increase in your wage is
enter your response here%. (Round your answer to one decimal place.)
What three issues are at the center of the debate regarding the accuracy of the CPI? Give an example of each issue.
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- Some economists have argued that if Social Security payments are not adjusted for inflation using the CPI, Social Security is underpaying recipients. What is the argument being made, and do you agree or disagree with it? Explain. 3.arrow_forwardThe reference base period for the CPI is 1982 – 1984. In April 2020, the CPI was 256.4 . What can we conclude from this information? The CPI in April 2020 tells us that the _______ of the prices paid by urban consumers for a fixed basket of consumer goods and services was _______. A. inflation rate; 156.4 percent per year B. inflation rate; 256.4 percent per year C. average; 256.4 percent higher in April 2020 than the average of 1982 – 1984 D. average; 156.4 percent higher in April 2020 than the average of 1982 – 1984arrow_forwardUse the information in the table to calculate a consumer price index (CPI) and the inflation rate. The base year is 1975. Round answers to two decimal places. Market basket Quantity 1975 prices 1976 prices A dozen eggs 29 $1.10 $1.70 Calculator 19 $15.00 $17.00 Microwave oven 9 $180.00 $230.00 What is the CPI for 1975?arrow_forward
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