Economics: Private and Public Choice (MindTap Course List)
16th Edition
ISBN: 9781305506725
Author: James D. Gwartney, Richard L. Stroup, Russell S. Sobel, David A. Macpherson
Publisher: Cengage Learning
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Chapter 7, Problem 8CQ
To determine
Identify the movie that has the largest real box office receipts.
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In the country of Gastronamia, the CPI is calculated using a market basket consisting of 6 apples,
5 loaves of bread, 4 robes, and 3 gallons of gasoline. The per-unit prices of these goods have
been as follows:
Year
2008
2009
2010
2011
Apples
$1.00
$1.00
$2.00
$3.00
Bread
$2.00
$1.50
$2.00
$3.00
Robes
$10.00
$9.00
$11.00
$15.00
Gasoline
$1.00
$1.50
$2.00
$2.50
Using 2009 as the base year, determine the following:
places.)
(Round all to two decimal
2008 CPI:
2009 CPI:
2010 CPI:
2011 CPI:
2009 Inflation rate:
2010 Inflation rate:
2011 Inflation rate:
What would $30,000 earned in 1995 be equal to in 2011? The CPis for the two years are 152.4 and 223.47, respectively.
Government survey takers determine that typical family expenditures each month in the year designated as the base year are as
follows:
NO
25 pizzas, $10 each
Apartment rent, $600 per month
Gasoline and car maintenance, $100 per month
Phone service (basic service plus 10 long-distance calls). $50 per month
In the base year, the CPI is 1.000. In the year following the base year, the survey takers determine that pizzas have risen to $11 each,
apartment rent is $640, gasoline and maintenance costs are $120, and phone service has dropped in price to $40.
Instructions: Enter your responses by rounding the CPI to three decimal places and the rate of inflation to one decimal place.
a. Find the CPI in the subsequent year and the rate of inflation between the base year and the subsequent year.
CPL 104.500
Rate of inflation:
4.5%
b. The family's nominal income rose by 5 percent between the base year and the subsequent year. Are they worse off or better off
in terms of what their income is able to…
Chapter 7 Solutions
Economics: Private and Public Choice (MindTap Course List)
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- Below is a list of annual CPI values for the years 2000-2003. Using these values please calculate the average annual rate of inflation over this period. Table Year CPI 2000 200.2 2001 205.6 2002 208.2 2003 209.1 4.45% 1.46% 2.97%arrow_forwardAt the end of 1989, the consumer price index was 105. At the end of 1990, the CPI was 110. Calculate the inflation rate between these two periods.arrow_forwardQ)Suppose you earned $80,000 in 2018 and the CPI value for the year was 244. Calculate your 2018 income in 2000 dollars. The CPI value for the year 2000 was 171.arrow_forward
- According to the U.S. Census Bureau (www.census.gov), the median household income in the United States was $23,618 in 1985, $34,076 in 1995, $46,326 in 2005, and $49,276 in 2010. In purchasing power terms, how did family income compare in each of those four years?You will need to know that the CPI (multiplied by 100, 1982–1984 = 100) was 107.6 in 1985, 152.4 in 1995, 195.3 in 2005, and 218.1 in 2010. Instructions: Enter your responses rounded to two decimal places. Year Real Income 1985 $ 1995 $ 2005 $ 2010 $arrow_forwardShollar's annual incomes for 2002, 2006, and 2009 were $25 000, $51 000, and $42 800 respectively. Given that the CPI for the three years 100.0, 109.1, and 114.4 respectively, compute Shollar's real income for 2006 and 2009arrow_forward2018 2019 Item Quantity Price Quantity Price Books 10 €30 8 €50 Pens 20 €1 15 €2 In 2018, consumers in a hypothetical economy consumed only books and pens. The prices and quantities for 2018 and 2019 are listed in the table above. The reference base period is 2018. Calculate the CPI in 2019. Give only a numerical answer. Where needed, use only a point () for decimals (e.g., 3.25, not 3,25) and no thousands separator (e.g., 2000, not 2,000).arrow_forward
- 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.arrow_forwardItems 2016 2017 2018 Pizza $10 $20 $20 Cell Phone Service $90 $180 $180 Crude Oil (barrel) $90 $180 $90 Calculate the percentage increase in CPI from the base year( 2017) to 2018arrow_forwardThe CPI (using a 2020 base year) for 2000 is 65.0. Suppose a household's annual take-home pay in 2000 was $48,500. What would be an equivalent take-home pay in 2020?arrow_forward
- Below are the values of the CPI for each year from 1992-1996. For each year, beginning with 1993, calculate the rate of inflation from the previous year. Year CPI 1992 1.40 1993 1.45 1994 1.48 1995 1.52 1996 1.57 Please enter your answers as percentages rounded to the nearest tenth of a percent (ie. if your answer in your calculator is 0.02644 enter your answer as 2.6 or 2.6% not 3%, 2.644, or 0.026). What is the inflation rate from 1992 - 1993? What is the inflation rate from 1993-1994? What is the inflation rate from 1994-1995? What is the inflation rate from 1995-1996?arrow_forwardA consumer expenditure survey reports the following information on consumer spending: 2020 2021 Price Quantity Price Quantity Product (1) $10 7 $10 7 Product (2) $6 10 $8 12 Product (3) $12 5 $14 10 a) Using 2020 as the base year, by how much does a "cost of products" index increase between 2020 and 2021? b) Calculate the inflation rate between 2020 and 2021, using the CPI you calculated in (a)arrow_forwardThe GDP deflator for this year is calculated by dividing the using by the using and multiplying by 100. However, the CPI reflects only the prices of all goods and servicesarrow_forward
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