Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 24, Problem 8PA
Subpart (a):
To determine
CPI and Social Security.
Subpart (b):
To determine
CPI and Social Security.
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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.
Chapter 24 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
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- Use the information in the table to calculate a consumer price index (CPI) and the inflation rate. The base year is 1975. Rou 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? 100 What is the CPI for 1976? 126.82 What is the inflation rate for 1976? Enter numeric value Incorrectarrow_forwardPlease answer a and barrow_forwardUse the information in the table to calculate a consumer price index (CPI) and the inflation rate. The base year is 1975. Round answer to two decimal places. Market basket Quantity 1975 prices 1976 prices A dozen eggs 21 $0.50 $0.90 Calculator 11 $10.50 $14.00 Microwave oven 2 $130.00 $150.00 What is the CPI for 1975? What is the CPI for 1976? What is the inflation rate for 1976?arrow_forward
- 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
- 13. In 2018 your annual salary was $54,370 per year and the CPI was 133.4. In 2022 your annual salary was $59,140 and the CPI was 151.2. a. What should your annual salary have been in 2022 if your 2018 annual salary increased at the rate of inflation from 2018 to 2022? Round your answer to the nearest dollar. b. By what percent was your actual 2022 salary above or below your inflation adjusted salary from part (a)? You must specifically state whether it was above or below the inflation adjusted salary. (answer as a % to 2 decimals)arrow_forwardPlease answer fastarrow_forwardWhy does the GDP deflator give a different rate of inflation than the CPI ?arrow_forward
- The cost of a gallon of gasoline was $0.57 in 1975. If the cost of gasoline grew with inflation what would the cost be in 2021? How does this compare this to the actual cost of gasoline in 2021? Explain your answer using a meaningful sentence. CPI in 1975 was 53.8 CPI in 2021 was 270.97arrow_forwardWhat is the purpose of the "Core" CPI and how is it different from the overall CPI? Do you think that the core CPI, or "core inflation" would be useful for measuring the cost of living and for indexing wages to inflation? Why or why not?arrow_forwardIn Brazil, the reference base period for the CPI is 2000. By 2005, prices had risen by 51 percent since the base period. The inflation rate in Brazil in 2006 was 10 percent, and in 2007, the inflation rate was 9 percent. Calculate the CPI in Brazil in 2006 and 2007. Brazil's CPI in 2008 was 173. Did Brazil's inflation rate increase or decrease in 2008?arrow_forward
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