SECTION A: Question 1 a. Answer True or False in the space provided. 1. Inflation typically falls in recession and increases in good times. 2. The GDP deflator is a price index which fixes quantities in the base year. 3. The CPI typically shows a higher rate of inflation than the GDP deflator. 4. If the GDP deflator were 150 in 2022 and goes up to 160 in 2023, the inflation rate calculated in 2023 would be 10 percent. 5. One problem with the GDP deflator is that it neglects the substitution effect. 6. The real interest rate is the nominal interest rate divided by a price index. 7. Unexpected inflation will benefit banks and other lenders. 8. Falling prices automatically benefit all sectors of an economy. 9. Sudden and unexpected deflation is more likely to be harmful to economic growth than sudden and unexpected inflation. 10. Prices of goods and services which are labor-intensive tend to be sticky prices of goods that are raw materials intensive tend to be flexible. b. The CPI is used to measure the cost of a typical basket of goods. The typical household in the Global-Land buys 4 loaves of bread, 3 pounds of cream cheese, and 8 books each week. The prices of these goods in years 2021, 2022, and 2023 and given in the table below: YEAR Price of a Price of a pound loaf of bread of cream chesse Price of a book 2021 $1 $3 $10 2022 $2 $6 $20 2023 $3 $6 $25 i. Calculate the CPI in 2023 using 2022 as the base year. ii. Calculate the CPI in 2021 using 2022 as the base year. iii. Calculate the rate of inflation between 2021 and 2022. iv. Calculate the rate of inflation between 2022 and 2023. v. Describe a reason why the inflation rate between 2022 and 2023 might overstate changes in the cost of living.

1. Inflation typically falls in recession and increases in good times. 2. The GDP deflator is a price index which fixes quantities in the base year. 3. The CPI typically shows a higher rate of inflation than the GDP deflator. 4. If the GDP deflator were 150 in 2022 and goes up to 160 in 2023, the inflation rate calculated in 2023 would be 10 percent. 5. One problem with the GDP deflator is that it neglects the substitution effect. 6. The real interest rate is the nominal interest rate divided by a price index. 7. Unexpected inflation will benefit banks and other lenders. 8. Falling prices automatically benefit all sectors of an economy. 9. Sudden and unexpected deflation is more likely to be harmful to economic growth than sudden and unexpected inflation. 10. Prices of goods and services which are labor-intensive tend to be sticky prices of goods that are raw materials intensive tend to be flexible. b. The CPI is used to measure the cost of a typical basket of goods. The typical…

A) Inflation is the steady and widespread increase in prices. The inflation rate, measured by CPI, rose .1% in May (since April) and rose a total of 4% year-over-year (May 2022 to May 2023). Read the BLS report on the Consumer Price Index and identify an “item” or “all items” and begin to consider why the price increased. Do a news search or using (clear, logical, rational) reasoningexplain whether prices are increasing because demand increased or because supply decreased. Graph and explain your answer

Suppose in the 1982 base year a typical market basket purchased by an urban family cost $250. In  1996, the same market basket cost $1,000.  The same market basket also cost $950 in 1995.   A) What is the consumer price index (CPI) for 1996?       B) What is the consumer price index (CPI) for 1995?     C) What was the annual rate of inflation for 1996?   d) Answer the Question in detail on the image provided

Question #2 Please Offer Good Explanation.   A dozen (12) eggs cost $0.90 in January 1980 and $2.50 in January 2020. The average wage for production workers was $7.50 per hour in January 1980 and $21.50 in January 2020.   A.) Calculate the price index for a dozen eggs in both years, using 1980 as the base year. Hint: Assume the “basket” only includes a dozen eggs. B.) Calculate the inflation rate for eggs between 1980 and 2020.  C.)Calculate the price index for the average wage for production workers in both years, using 1980 as the base year. Hint: Assume the “basket” only includes the average wage.  D.)Calculate the inflation rate for the average wage between 1980 and 2020. E.)For each year, how many minutes did a worker have to work to earn enough money to buy a dozen eggs? . F.)Based on your previous calculations, did the purchasing power of workers increase or decrease in 2020 (with respect to 1980)? Explain your answer.

This table indicates the historical level of the Consumer Price Index (CPI) for the United States for 1921, 1922, and 1923. Complete the table by (1) selecting the inflation rates for 1922 and 1923, and (2) indicating for each year whether there has been inflation, deflation, or hyperinflation. Year CPI Inflation Rate Change in Price Level 1921 17.9 — — 1922 16.8           1923 17.1             What rates of inflation for 1924 would be consistent with disinflation between 1923 and 1924? Check all that apply. 1.7%   11.8%   51.8%   1.8%     What rates of inflation for 1924 would be consistent with hyperinflation? Check all that apply. 15.0%   -1.8%   100.0%   120.0%

QUESTION 19 In an imaginary economy, consumers buy only sandwiches and hamburgers. The typical consumer consumes 10 sandwiches and 6 hamburgers. A sandwich cost $3 in 2020 and $5.40 in 2021. A hamburger cost $5 in 2020 and $6 in 2021. Which of the following statements is correct? When 2007 is chosen as the base year, the inflation rate is 50 percent in 2007 O When 2006 is chosen as the base year, the consumer price index is 90 in 2007. O When 2006 is chosen as the base year, the inflation rate is 150 percent in 2007. When 2006 is chosen as the base year, the inflation rate is 5 percent in 2007 When 2007 is chosen as the base year, the consumer price index is 100 in 2006. O O

Quantity Quantity Item (2018) Price (2018) (2019) Price (2019) Magazines 400 $5.00 450 $4.50 Movie tickets 50 $6.00 200 $8.00 Pizzas 100 $10.00 120 $10.50 The data in the table above shows the consumption by families in an economy. The year 2018 is the reference base period. Based on the table above, between 2018 and 2019, the inflation rate in this country was 2.5 percent. 98.5 percent. -1.5 percent. 105.1 percent. -2.5 percent.

1. Inflation typically falls in recession and increases in good times.________ 2. The GDP deflator is a price index which fixes quantities in the base year.________ 3. The CPI typically shows a higher rate of inflation than the GDP deflator.________ 4. If the GDP deflator were 150 in 2022 and goes up to 160 in 2023, the inflationrate calculated in 2023 would be 10 percent.________ 5. One problem with the GDP deflator is that it neglects the substitution effect.________ 6. The real interest rate is the nominal interest rate divided by a price index.________ 7. Unexpected inflation will benefit banks and other lenders.________ 8. Falling prices automatically benefit all sectors of an economy.________ 9. Sudden and unexpected deflation is more likely to be harmful to economicgrowth than sudden and unexpected inflation.________ 10. Prices of goods and services which are labor-intensive tend to be sticky prices of goods that are raw materials intensive tend to be flexible.b. The CPI is used…

QUESTION FIVE Question Suppose that the representative consumer in Country ABC buys 4 units of each consumer good and the prices of each good are: Consumer Good 2019 2020 2021 $4 $5 $5 7 7.5 8 358 X Y Z a) What is the cost of a typical basket of consumer goods for 2019, 2020, and 2021? b) Convert the cost of each bundle into a CPI using 2019 as the base year. c) What is the inflation rate for 2020 and 2021?