If the consumer price index (CPI) says that inflation equaled 10% last year, then the chained CPI for urban consumers is likely to say that inflation equaled 9.7% last year. a) True b) False
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- The index number representing the price level changes from 110 to 115 in one year and then from 115 to 120 the next year. Since the index number increases by five each year, is five inflation rate each year? Is the inflation rate the same each year? Explain your answer.Rosalie the Retiree knows that when she retires in 16 years, her company will give her a one-time payment of 20,000. However, if the inflation rate is 6 per year, how much buying power will that 20,000 have when measured in todays dollars? Hint: Start by calculating the rise in the price level over the 16 years.The total price of purchasing a basket of goods in the United Kingdom over four years is: year 1=940, year 2=970, year 3=1000, and year 4=1070. Calculate two price indices, one using year 1 as the base year (set equal to 100) and the other using year 4 as the base year (set equal to 100). Then, calculate the inflation rate based on the first price index. If you had used the other price index, would you get a different inflation rate? If you are unsure, do the calculation and find out.
- Describe a situation, either a government policy situation, an economic problem, or a private sector situation, where using the CPI to convert from nominal to real would be more appropriate man using the GDP deflate:1) Over the last 10 years, the average rate of inflation has been 1.61%. what is the purchasing power of a dollar today in terms of what a dollar could purchase in 2008? 2) In 1970 tuition cost $1990. Today (2018) the cost is $64,890. Has the cost risen faster or slower than the rate of inflation of 3.87%? 3) Tuition at XYZ this year cost $61,170. If the inflation rate is 2% for the foreseeable future and if the cost of attending XYZ rises at the rate of inflation, what will it cost in 20 years to attend XYZ for 1 year? For 4 years (2038-2042)?Refer to the same table. (The following table lists the per gallon prices of gas and milk for the months of April, May, and June. Assume that the typical consumer buys 60 gallons of gas and 4 gallons of milk each month, and that April is the base period.) What is the inflation rate for May?
- The average annual cost(tuition, fees, and room and board) at four-year private universities rose from $6,070in 1980 to $29,257 in 2004. Calculate the percentage rise in cost from 1980 to2004, and compare it to the overall rate of inflation as measured by the Consumer Price Index. The Consumer Price Index for 1980 is82.6and the Consumer Price index for 2004 is 188.9.The percentage rise in cost from 1980 to 2004 is %??(Round to the nearest tenth as needed.)c) The government has released the latest retail price index which suggests inflation was1.62%. A typical basket of food at the supermarket this week costs £52.67. Calculate thecost of that typical basket:i) a year agoii) one month ago (assuming inflation occurs evenly throughout the year)Refer to Table 3. Assume that this economy produces only two goods Good X and GoodY. If year 1 is the base year, the value for this economy’s inflation rate between year 1 andyear 2 isA) -6.1%.B) -5.5%.C) 6.5%.D) 79%.
- Suppose you borrow $1,000 of principal that must be repaid t the end of two years, along with interest of 5 percent a year. If the annual inflation rate turns out to be 10 percent, Hint: Future value = Present value x (1 + Growth in prices), where t is the number of years evaluated. Real value of loan repayment Amount of loan x (1 + Real interest rate) Instructions: Round your responses to the nearest whole number. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. a. What is the real rate of interest on the loan? % b. What is the real value of the principal repayment? c. Who loses, the debtor or the creditor? Debtor O Creditor(e) Now suppose that a new market bundle is defined; "the market bundle" is now 6 burgers, 2 patties and 4 pizzas. Compute the CPI for the three years, using this "market bundle" and using 1990 as the base year. (f) what is the new inflation rate from 2000 to 2010, using the CPI you calculated in (e).If the inflation rate is 6% and Susan receives a 6% increase in income, then, over the year, Susan's: (a) Real and nominal income both remain unchanged; (b) Real and nominal income both rise; (c) Real income rises but nominal income remains unchanged; (d) Nominal income rises but real income remains unchanged. Given the import function, Z = 300 + 2/3Y, which of the following statements is correct? (a) The marginal propensity to save is 1/3; (b) The induced component is 300; (c) 2/3 is the proportion of any income spent on imports; (d) None of the statements is correct. An increase of R5 billion in income in a macroeconomy leads to an increase in R3 billion in consumption spending. From this information, we can determine that the marginal propensity to save in this economy is: (a) 0.6; (b) 0.5; (c) 0.3; (d) 0.4.