Economics: Private and Public Choice
16th Edition
ISBN: 9781337642224
Author: James D. Gwartney; Richard L. Stroup; Russell S. Sobel
Publisher: Cengage Learning US
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Question
Chapter 8, Problem 10CQ
(a)
To determine
Identify the president’s real salary.
(b)
To determine
Identify the year in which president has the highest and lowest salary.
(c)
To determine
Identify the effect of the president’s real salary.
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decisions ?
The nominal salary paid to the president of the United States
along with data for the consumer price index (CPI) are given
for various years below.
YEAR
PRESIDENTIAL SALARY
CPI (2000 = 100)
1920
$75,000
11.6
1940
75,000
8.1
1960
100,000
17.2
1980
200,000
47.9
2000
400,000
100.0
a. Calculate the president's real salary measured in the
purchasing power of the dollar in 2000.
b. In which year was the real presidential salary the highest?
c. The president's nominal salary was constant between
1920 and 1940. What happened to the real salary? Can
you explain why?
Congratulations! Your boss has given you a raise.
However, you want to know whether your purchasing power has actually increased, since inflation is rising as well. The table below gives you data for wages and the Consumer Price Index (CPI) for
the last two years.
Year 1
Year 2
Wage ($/day)
$2,000
$2,100
The nominal percentage increase in your wage is%. (Round your answer to one decimal place.)
The real percentage increase in your wage is%. (Round your answer to one decimal place.)
CPI
115
128.8
What is the current inflation rate as measured by the Consumer Price Index? You can use either the February or March 2022 figure. Describe the pattern of the Consumer Price Index since the beginning of 2020. Describe the pattern of the CPI since 2010. (Hint: Utilize Trading Economics (Links to an external site.) or FRED (Links to an external site.) to get the data. Please note that the inflation rate is not the same thing as the level of the CPI. The inflation rate is measured as the percentage change in the level of the CPI during a period of time.
Chapter 8 Solutions
Economics: Private and Public Choice
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Similar questions
- Consider the following information about SUNY tuition: year 1980 2016 SUNY tuition $900 $6470 CPI 86 243 What is the growth rate of nominal tuition during this period? What is the growth rate of real tuition during this period? What is the rate of inflation during this period? What can you conclude about the real cost of college attendance?arrow_forwardThe following table shows the average nominal interest rates on six-month Treasury bills between 1971 and 1975, which determined the nominal interest rate that the U.S. government paid when it issued debt in those years. The table also shows the inflation rate for the years 1971 to 1975. (All rates are rounded to the nearest tenth of a percent.) Year 1971 1972 1973 1974 1975 INTEREST RATE (Percent) Source: "Economic Report of the President (2007)," United States Government Printing Office, last modified February 1, 2007, accessed March 11, 2013, http://www.gpo.gov/fdsys/pkg/ERP-2007/pdf/ERP-2007.pdf. On the following graph, use the orange points (square symbol) to plot the nominal interest rates for the years 1971 to 1975. Next, use the green points (triangle symbol) to plot the real interest rates for those years. 8.0 7.0 6.0 5.0 4.0 1.0 -1.0 -2.0 -3.0 Nominal Interest Rate (Percent) 4.5 4.5 7.2 7.9 6.1 -4.0 1970 1971 1972 1973 1974 1971 1975 Inflation Rate (Percent) 4.4 3.2 6.2 11.0…arrow_forwardJenny earned a salary of $48,000 in 2010 and a salary of $60,000 in 2014. The consumer price index in 2010 was 220.5. The consumer price index was 236.2 in 2014. Jenny's 2010 salary in 2014 dollars isarrow_forward
- Congratulations! Your boss has given you a raise. However, you want to know whether your purchasing power has increased, since inflation is also rising. The table below gives you data for wages and the Consumer Price Index (CPI) for the last two years. Wage ($/day) CPI Year 1 $ 2000 CPI 120 Year 2 $2200 CPI 129.6 The nominal percentage increase in your wage is enter your response here%. (Round your answer to one decimal place.) Part 2 The real percentage increase in your wage is enter your response here%. (Round your answer to one decimal place.)arrow_forwardPlease explain how the Consumer Price Index (CPI) is calculated and critically evaluate its merits as a measure of inflation.arrow_forwardAnswer fast with details explaintion.....arrow_forward
- Explain how the Consumer Price Index (CPI) is calculated and critically evaluate its merits as a measure of inflation (approx 250 words)arrow_forwardExplain what is the relationship between the consumer price index and the inflation rate.arrow_forwardConsider an economy in which the nominal interest rate exceeds the real interest rate by 2 percentage points. Find the expected inflation rate.arrow_forward
- The following table shows a person's nominal and real wages for three years, as well as the price level (price index) for each year, using the first year as the base year. Fill in the blanks in the table, and then calculate the annual inflation rate for each year (not including the base year). Instructions: Round your answers to 2 decimal places. Year Nominal Wage ($) Real Wage ($) Price Level Inflation Rate (%) 1 10.00 12.50 15.00 120.00 10.00 140.00arrow_forwardWould excluding certain goods and services from CPI be beneficial for policymakers?arrow_forwardThe prices of products and the wages paid to labor each change over time. Describe how prices and wages have changed over time. For your description of wage changes, include a description of how nominal and real wages changearrow_forward
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