Principles of Economics, 7th Edition (MindTap Course List)
7th Edition
ISBN: 9781285165875
Author: N. Gregory Mankiw
Publisher: Cengage Learning
expand_more
expand_more
format_list_bulleted
Question
Chapter 24, Problem 2QCMC
To determine
Thelargest component ofCPI’s basket.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
The market basket used to calculate the CPI in Aquilonia is 4 loaves of bread, 6 gallons of milk, 2 shirts, and 2 pairs of pants. In 2005, bread cost $1.00 per loaf, milk cost $1.50 per gallon, shirts cost $6.00 each, and pants cost $10.00 per pair. In 2006, bread cost $1.50 per loaf, milk cost $2.00 per gallon, shirts cost $7.00 each, and pants cost $12.00 per pair. Using 2005 as the base year, what was Aquilonia’s inflation rate in 2006?
This question is stumping me. I thought that this answer was 124.4 but it seems that it is 24.4. I cant figure it out
Price (2011) Quantity (2012)
$5.00
$6.00
Item
Quantity (2011)
Price (2012)
Magazines
450
200
$4.50
$8.00
$10.50
400
Movie tickets
50
Pizzas
100
$10.00
120
The data in the table above shows the consumption by families in an economy. The year 2011 is the reference base period.
Based on the table above, the CPI for 2012 is
A. 105.1.
B. 5.0 percent.
C. 102.5.
O D. 100.
O E. 98.5.
Describe how the CPI is calculated. How might the CPI overstate the true increase in cost of living?
Chapter 24 Solutions
Principles of Economics, 7th Edition (MindTap Course List)
Knowledge Booster
Similar questions
- In a simple economy, people consume only two goods: food and clothing. The market basket of goods used to compute the CPI has 40 units of food and 20 units of clothing. Food Clothing Last year's price $10 $ 18 This year's price $14 $21 a) What are the percentage increases in the price of food? Number b) What are the percentage increases in the price of clothing? Number c) What is the percentage increase in the CPI? Numberarrow_forwardThe market basket used to calculate the CPI in Aquilonia is 4 loaves of bread, 6 gallons of milk, 2 shirts and 2 pants. In 2001 bread cost $1.00 per loaf, milk cost $1.50 per gallon, shirts cost $6.00 each and pants cost $10.00 per pair. In 2002 bread cost $1.50 per loaf, milk cost $2.00 per gallon, shirts cost $7.00 each and pants cost $12.00 per pair. What was the inflation rate, as measured by the CPI, for Aquilonia between 2001 and 2002? a. 24.4 percent b. 21.6 percent c. It is impossible to determine without knowing the base year. d. 30 percentarrow_forwardThe market basket used to calculate the CPI in Aquilonia is 4 loaves of bread, 6 gallons of milk, 2 shirts and 2 pants. In 2001 bread cost $1.00 per loaf, milk cost $1.50 per gallon, shirts cost $6.00 each and pants cost $10.00 per pair. In 2002 bread cost $1.50 per loaf, milk cost $2.00 per gallon, shirts cost $7.00 each and pants cost $12.00 per pair. What was the inflation rate, as measured by the CPI, for Aquilonia between 2001 and 2002? O a. It is impossible to determine without knowing the base year. O b. 21.6 percent O C 24.4 percent d. 30 percent Which of the following statements is correct? O a. GDP at factor cost = Net price increase + direct tax O b. GDP at factor cost = Net Value Addition + Depreciation O c. GDP at factor cost = Net price increase + indirect tax O d. GDP at factor cost = Net Value Addition - Depreciationarrow_forward
- The largest component in the basket of goods andservices used to compute the CPI isa. food and beverages.b. housing.c. medical care.d. apparel.arrow_forwardIn a simple economy, people consume only two goods: food and clothing. The market basket of goods used to compute the CPI has 50 units of food and 10 units of clothing. Food Clothing Last year's price $4 $8 This year's price $6 $16 a. What are the percentage increases in the price of food and in the price of clothing? b. What is the percentage increase in the CPI? c. Do these price changes affect all consumers to the same extent? Explainarrow_forwardBasket Items Unit $ per unit (2020) $ per unit (2021) $ per unit (2022) Cougar Tail 1 donut $5 $4.50 $4.25 Mint Brownie ½ sheet $29.98 $34.99 $39.99 Graham Canyon ice cream 5 quarts $14.99 $16.49 $17.99 Calculate the CPI for each year, using 2020 as the base year.arrow_forward
- explain four main differences between the GDP Deflator and CPI, with one example for each difference.arrow_forwardWhich goods are supposed to be included in the CPI? Group of answer choices All goods and services that typical consumers buy. All goods and services produced in the economy. All goods and services in the consumption component (C) of the GDP. All the goods, but not the services, in the consumption component (C) of the GDP.arrow_forwardWhat is the relationship between real GDP and CPIarrow_forward
- Explain what is the difference between CPI and GDP deflator?arrow_forwardCovid 19 pandemic has forced the people in the economy Love & Laughter, to consume only 2 goods, food, and clothing. The CPI is derived from the market basket of goods which consists of 25 units of food and 5 units of clothing. FOOD Clothing 2018 price per unit $8 $20 2019 price per unit $12 $40 1. What are the percentage increases in the price of food and in the price of clothing? 2. What is the percentage increase in the CPI? 3. Do these price changes affect all consumers to the same extent? Explain.arrow_forwardThe table shows the quantities in the CPI basket and the prices in 2018, 2019, and 2020. The reference base year is 2018. Item Quantity 2018 Price 2019 Price 2020 Price Bread 2 loaves $0.50 a loaf $0.75 a loaf $0.75 a loaf Milk 5 cartons $0.75 a carton $1.00 a carton $0.75 a carton Eggs 3 dozen $2.00 a dozen $3.00 a dozen $2.50 a dozen Calculate the cost of the CPI basket in 2019 prices and the cost of the CPI basket in 2020 prices. Calculate the CPI in 2019 and in 2020. Calculate the inflation rate in 2020. The cost of the CPI basket in 2019 prices is $nothing and the cost of the CPI basket in 2020 prices is $nothing. >>> Answer to 2 decimal places. The CPI in 2019 is nothing and the CPI in 2020 is nothing. >>> Answer to 1 decimal place. The inflation rate in 2020 is nothing percent.arrow_forward
arrow_back_ios
SEE MORE QUESTIONS
arrow_forward_ios
Recommended textbooks for you
Economics (MindTap Course List)EconomicsISBN:9781337617383Author:Roger A. ArnoldPublisher:Cengage Learning
Exploring EconomicsEconomicsISBN:9781544336329Author:Robert L. SextonPublisher:SAGE Publications, Inc
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning
Exploring Economics
Economics
ISBN:9781544336329
Author:Robert L. Sexton
Publisher:SAGE Publications, Inc