Essentials of Economics (MindTap Course List)
8th Edition
ISBN: 9781337091992
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Chapter 16.1, Problem 1QQ
To determine
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Which of the following statements about the CPI is true? How does the PCEPI differ from the CPI?
The CPI _______.
A.
has a bias of approximately 2.0 percentage points a year
B.
is a measure of the change in the amount of money that people need to spend to achieve a given standard of living
C.
measures all the changes in the cost of living
D.
is a relatively useless measure because every year new goods become available and some old goods disappear
The PCEPI _______.
A.
uses the same market basket as the CPI but gives a greater weight to sticky-price items
B.
introduces even more biases into the inflation rate than the CPI
C.
excludes the prices of food and energy
D.
uses the prices of goods and services included in the consumption expenditure component of GDP
The table below lists the CPI and wage values for the United States from different decades.
a. Complete the table by computing the real income for each year shown in the table.
Instructions: Round your answers to two decimal places.
Nominal and Real Income
Hanna, who is a 5-year-old girl, eats nothing but pasta, yogurt, and lemonade. Each month her parents buy 19 pounds of pasta, 53
packages of yogurt, and 9 bottles of lemonade. These three items make up a basket of goods and services similar to the much larger
basket used by the Bureau of Labor Statistics (BLS) when computing the official Consumer Price Index (CPI). The table below lists the
average price for each item in this basket for the past four years.
Hanna's Meals
Year
1
2
3
4
Pasta (dollars
per pound)
$1.96
1.78
1.62
1.47
Yogurt (dollars per Lemonade (dollars per
package)
$0.94
1.04
1.04
1.14
bottle)
$1.86
2.08
1.83
1.88
Instructions: Round your answers to two decimal places.
a. For each year, calculate the CPI, using year 1 as the base year.
In year 1, the CPI was
In year 2, the CPI was
In year 3, the CPI was
In year 4, the CPI was
b. For each year, calculate the CPI, using year 3 as the base year.
Chapter 16 Solutions
Essentials of Economics (MindTap Course List)
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- 8. The table below shows some data I got from FRED on the CPI and PCE deflator. The PCE deflator is a price index similar to the GDP deflator but only uses the consumption ("personal consumption expenditures") part of the GDP data. Year CPI PCE deflator 1989 123.94 60.69 2001 177.04 79.74 2020 258.84 111.15 You were probably born around 2001 so calculate the annualized inflation rate based on the CPI between 2001 and 2020. Repeat to find the annualized inflation using the PCE deflator between 2001 and 2020. The gives a higher inflation rate a. PCE, and its noticeably higher (over 0.5 percentage points) b. PCE, but its not that different from the CPI inflation rate (difference is under 0.5 percentage points) c. CPI, and its noticeably higher (over 0.5 percentage points) d. CPI, but its not that different from the CPl inflation rate (difference is under 0.5 percentage points)arrow_forward1.The CPI in the base year is 2.The CPI in 2018 is 3.you learn next year (2019) that the CPI is 178. What is the inflation rate between 2018 and 2019?arrow_forwardHow does the CPI compare the cost of the typical market basket of goods and services?arrow_forward
- The table below lists hypothetical CPI and wage values for the United States from different decades. a. Complete the table by computing the real income for each year shown in the table. Instructions: Round your answers to two decimal places. Nominal and Real Income Average Real Wage (dollars) Average Nominal Wage (dollars) $7,329 14,131 27,249 38,882 51,462 54,449 Year CPI 1967 34.9 1977 62.6 1987 118.1 1997 167.5 2007 215.3 2013 242.5 Instructions: Enter the year using all four numbers (yyyy). b. Of the years listed above, the paycheck of the average worker was highest in c. Of the years listed above, the purchasing power of the average worker was highest inarrow_forwardThe table below lists hypothetical CPI and wage values for the United States from different decades. a. Complete the table by computing the real income for each year shown in the table. Instructions: Round your answers to 2 decimal places. Nominal and Real Income Average Nominal Wage (dollars) Year CPI Average Real Wage (dollars) 1967 $7,077 33.4 1977 13,579 60.6 1987 26,055 113.6 1997 37,177 160.5 2007 49,698 207.3 2013 52,322 233 Instructions: Enter the year using all four numbers (yyyy). b. Of the years listed above, the paycheck of the average worker was highest in c. Of the years listed above, the purchasing power of the average worker was highest inarrow_forward2:58 PM • ← December 5, 2022 14:58 Food $4 $6 VPN Clothing $10 Vo LTE 3300 1. In a simple economy, people consume only 2 goods, food and clouming market basket of goods used to compute the CPI consists of 50 units of food and 10 units of clothing. 84 0 2002 price per unit 2003 price per unit $20 a. What are the percentage increases in the price of food and in the price of clothing? the percentage increase in the CPI? 8arrow_forward
- The CPI in 2021 equals _______. A. 51.4 B. 100.0 C. 74.0 D. 194.7arrow_forwardSuppose for Candyland the cost of a CPI basket is worth $500 in 2016, and the same basket is worth $600 in 2017. Answer the following questions a. Using 2016 as the base year, calculate the CPIs of 2016 and 2017, respectively. Then calculate the inflation rate between 2016 and 2017. Show steps. b. If a computer costs $1500 in 2016, using the CPIs you calculated in (a), what is the cost of this computer if measured in 2017 dollars? Show steps. Hint: the same computer should have the same real values in both years.arrow_forwardlwk I K The following table shows the top 10 films of all time through January 2021, measured by box office receipts in the United States, as well as several other notable films farther down the list. The CPI in 2020 was 259. Use this information and the data in the table to calculate the box office receipts for each film in 2020 dollars. Assume that each film generated all of its box office receipts during the year it was released. Use your results to prepare a new list of the top 10 films, based on their earnings in 2020 dollars. (Some of the films, such as the first Star Wars film, Gone with the Wind, and Snow White and the Seven Dwarfs, were re-released several times, so their receipts were actually eamed during several different years, but we will ignore that complication.) Fill in the real value of box office receipts in the table below. (Enter your responses rounded to one decimal place.) Rank 1 2 3 4 5 6 7 8 9 10 18 Part 1 of 2 19 23 117 214 244 397 Film Star Wars: Episode…arrow_forward
- The table below shows some data I got from FRED on the CPI and PCE deflator. The PCE deflator is a price index similar to the GDP deflator but only uses the consumption ("personal consumption expenditures") part of the GDP data. Year CPI PCE deflator 1989 123.94 60.69 2001 177.04 79.74 2020 258.84 111.15 You were probably born around 2001 so calculate the annualized inflation rate based on the CPI between 2001 and 2020. Repeat to find the annualized inflation using the PCE deflator between 2001 and 2020. The gives a higher inflation rate O PCE, and its noticeably higher (over 0.5 percentage points) PCE, but its not that different from the CPI inflation rate (difference is under 0.5 percentage points) CPI, and its noticeably higher (over 0.5 percentage points) CPI, but its not that different from the CPI inflation rate (difference is under 0.5 percentage points)arrow_forwardUsing the Consumer Price Index (CPI) detailed in the table below, Year 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 CPI 130.7 136.2 140.3 144.5 148.2 152.4 156.9 160.5 163.0 166.6 172.2 177.1 179.7 184.0 188.9 Instructions: Round your responses to one decimal place. If you are entering any negative numbers be sure to include a negative sign (-) in front of those numbers. a. Calculate the inflation rate for 2007-2008: 2008-2009: 2014-2015: 2015-2016: Year 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 % % % % CPI 195.3 201.6 207.3 215.3 214.5 218.1 224.9 229.6 233.0 236.7 237.0 240.0 245.1 251.1 255.7 b, c. Which years had inflation? Which years had deflation? In 2007-2008, there was (Click to select) ✓ In 2008-2009, there was (Click to select)arrow_forward
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