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- an inflation rate that tends to be a leading indicator of future inflation rates is the a. GDP price index b. retail price index c. producer price index d. consumer price indexThe Consumer Price Index (CPI) is the common measure of inflation in the United States and is a Laspeyeres index. The Chained CPI (or similarly PCE Inflation), which are Paasche indices are offered forth as what might be "better" alternatives. a. Explain how the CPI is calculated and describe the things that you perceive to be right and wrong with the measurement b. What is the difference between CPI and Chained CPI? How would a move to Chained CPI likely affect inflation estimates? c. There have been proposals to move cost of living adjustments for social security and inflation adjustments for the federal poverty level (FPL) from CPI to the Chained CPI. What would be the long term effects of such a move for each? d. Changing the way inflation is calculated would also affect Real GDP estimates over time as well as the Real Wage. How would the estimates be affected over time and why? Be explicit.Match each price index with their description. prices of merchandise that is exported or imported. wage inflation in the labor market. 1. International Price Index this index is based on the price fo a fixed basket of goods and services that represent the purchases of an average household. 2. Producer Price Index 3. Employment Cost Index 4. GDP Deflator this index takes the CPI and excludes volative economic variables 5. Core Inflation Index 6. Consumer Price Index a price index that includes all the GDP components prices paid for supplies and inputs by producers of goods and services.
- 1. Calculating inflation using a simple price index Consider an imaginary price index, the Undergraduate Price Index (UPI), created to represent the annual purchases made by a typical undergradute. The following table contains information on the market basket for the UPI and the price of each good in 2020, 2021, and 2022. The cost of each good in the basket as well as the basket's total cost are given for 2020. Perform these same calculations for 2021 and 2022, and enter the results in the following table Streaming services Iced coffees Textbooks Notebooks Energy drinks Total cost Price index Quantity in Basket 1 150 10 8 40 Suppose this price Index uses 2020 as the base year 2020 Price (Dollars) 64 2 80 2 3 Between 2020 and 2021, the UPI increased by Cost (Dollars) 64 300 800 16 120 1.300 100 Price (Dollars) 104 2 85 2 4 2021 In the last row of the cable, calculate and enter the value of the UPI for the remaining years Cost (Dollars) Price Cost (Dollars) (Dollars) 134 2 105 4 5 2022…1. Calculating inflation using a simple price index Consider an imaginary price index, the Undergraduate Price Index (UPI), created to represent the annual purchases made by a typical undergradute. The following table contains information on the market basket for the UPI and the price of each good in 2020, 2021, and 2022. The cost of each good in the basket as well as the basket's total cost are given for 2020. Perform these same calculations for 2021 and 2022, and enter the results in the following table. Streaming services Iced coffees Textbooks Notebooks Energy drinks Total cost Price index Quantity in Basket 1 150 10 8 40 Price (Dollars) 64 2 Suppose this price index uses 2020 as the base year. 2020 80 2 3 Cost (Dollars) 64 300 800 16 120 1,300 100 Price (Dollars) 104 2 85 2 2021 Cost (Dollars) In the last row of the table, calculate and enter the value of the UPI for the remaining years. Between 2020 and 2021, the UPI Increased by 104 300 850 16 160 1,430 110) Between 2021 and…Question 1 1.a) When inflation occurs, all prices rise together at the same rate. True False 1.b) To calculate the consumer price index, the basket price in the current year is divided by the a.GDP deflator b.inflation rate c.basket price in the base year 1.c) Milton Friedman said that inflation is always and everywhere caused by a.printing money b.minimum wages c.too much government spending
- 2. Compute inflation rates for the following cases. a. Calculate the one-period inflation rate for the US in 2022 given that the CPI in 2021 was 271.0 and the CPI in 2022 was 292.7. b. Using the CPI data table from question 1, calculate the average annual inflation rate from 1970 to 1990. (Hint- this will use the constant growth formula from Lecture 3). c. Using the CPI data table from question 1, calculate the average annual inflation rate from 2000 to 2020. (Hint- this will use the constant growth formula from Lecture 3).Which of the following refers to the decrease in the general price level of goods and services in an economy over a period of time? A. Inflation B. Deflation C. Stagflation D. HyperinflationThe table below pertains to Studious, an economy in which the typical consumer’s basket consists of 5 books and 10 calculators. Year Price of Books Price pf Calculator 2010 $24 $8 2011 $30 $12 2012 $32 $15 - Referring to the above table compute the followings: A- The cost of the basket. B- The consumer price index. C- The inflation rate in 2012.
- Consider the following: Price Index in 2017 90 Price Index in 2018 100 Price Index in 2019 106 Price Index in 2020 129 Price Index in 2021 149 a. The base year is 2018 b. Calculate the inflation rate from 2018 to 2019. 6 % (Enter your response as a percentage rounded to two decimal places.) c. Calculate the inflation rate from 2019 to 2020. 21.70 % (Enter your response as a percentage rounded to two decimal places.) d. Assume the cost of a market basket in 2018 is $2,094.0. (Enter your responses rounded to one decimal place.) Calculate the cost of the same basket of goods and services in 2017. Calculate the cost of the same basket of goods and services in 2021.#Question 2 explain with deatils 2. 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.Table 24-2The following table pertains to Shishkaton, an economy in which the typical consumer's basket consists of 15 pounds of prunes and 7 dolls. Year Price of Prunes (Dollars per pound) Price of Dolls (Dollars per toy) 1 12 7 2 10 6 3 8 5 12. Refer to Table 24-2. The inflation rate was a. positive in Year 2 and negative in Year 3. b. negative in Year 2 and positive in Year 3. c. positive in Year 2 and positive in Year 3. d. negative in Year 2 and negative in Year 3.