Foundations of Economics (8th Edition)
8th Edition
ISBN: 9780134486819
Author: Robin Bade, Michael Parkin
Publisher: PEARSON
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Chapter 23, Problem 1MCQ
To determine
To find:
The option that correctly states what is measured by
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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? Explain
In 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? Number
Which of the following statements about the CPI is true? How does the PCEPI differ from the CPI?
The CPI _______.
A.
has a bias of approximately 2.0 percentage points a year
B.
is a measure of the change in the amount of money that people need to spend to achieve a given standard of living
C.
measures all the changes in the cost of living
D.
is a relatively useless measure because every year new goods become available and some old goods disappear
The PCEPI _______.
A.
uses the same market basket as the CPI but gives a greater weight to sticky-price items
B.
introduces even more biases into the inflation rate than the CPI
C.
excludes the prices of food and energy
D.
uses the prices of goods and services included in the consumption expenditure component of GDP
Chapter 23 Solutions
Foundations of Economics (8th Edition)
Ch. 23 - Prob. 1SPPACh. 23 - Prob. 2SPPACh. 23 - Prob. 3SPPACh. 23 - Prob. 4SPPACh. 23 - Prob. 5SPPACh. 23 - Prob. 6SPPACh. 23 - Prob. 7SPPACh. 23 - Prob. 8SPPACh. 23 - Prob. 9SPPACh. 23 - Prob. 10SPPA
Ch. 23 - Prob. 1IAPACh. 23 - Prob. 2IAPACh. 23 - Prob. 3IAPACh. 23 - Prob. 4IAPACh. 23 - Prob. 5IAPACh. 23 - Prob. 6IAPACh. 23 - Prob. 7IAPACh. 23 - Prob. 8IAPACh. 23 - Prob. 9IAPACh. 23 - Prob. 10IAPACh. 23 - Prob. 1MCQCh. 23 - Prob. 2MCQCh. 23 - Prob. 3MCQCh. 23 - Prob. 4MCQCh. 23 - Prob. 5MCQCh. 23 - Prob. 6MCQCh. 23 - Prob. 7MCQCh. 23 - Prob. 8MCQ
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- 1. In a simple economy, people consume only 2 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 $10 2002 Price $4 2003 Price $6 $20 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? Explain.arrow_forwardCovid 19 pandemic has force the people in the economy Love & Laughter, to consume only 2 goods, food and clothing. The CPI is derived from the market basket of goods which consists of 25 units of food and 5 units of clothing. FOOD Clothing 2018 price per unit $8 $20 2019 price per unit $12 $40 (i). What are the percentage increases in the price of food and in the price of clothing? (ii). What is the percentage increase in the CPI? (iii). Do these price changes affect all consumers to the same extent? Explain.arrow_forwardWhich goods are supposed to be included in the CPI? a. All goods and services produced in the economy b. All the goods, but not the services, in the consumption component of the GDP accounts c. All goods and services in the consumption component of the GDP accounts d. All goods and services that typical consumers buyarrow_forward
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