Economics (7th Edition) (What's New in Economics)
7th Edition
ISBN: 9780134738321
Author: R. Glenn Hubbard, Anthony Patrick O'Brien
Publisher: PEARSON
expand_more
expand_more
format_list_bulleted
Question
Chapter 26, Problem 26.3RDE
Subpart (a):
To determine
Calculation of inflation rate using PCE and CPI .
Subpart (b):
To determine
Calculation of inflation rate using PCE and CPI.
Expert Solution & Answer
Want to see the full answer?
Check out a sample textbook solution
Students have asked these similar questions
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%
Explain what is the relationship between the consumer price index and the inflation rate.
What is the current inflation rate as measured by the Consumer Price Index? You can use either the February or March 2022 figure. Describe the pattern of the Consumer Price Index since the beginning of 2020. Describe the pattern of the CPI since 2010. (Hint: Utilize Trading Economics (Links to an external site.) or FRED (Links to an external site.) to get the data. Please note that the inflation rate is not the same thing as the level of the CPI. The inflation rate is measured as the percentage change in the level of the CPI during a period of time.
Chapter 26 Solutions
Economics (7th Edition) (What's New in Economics)
Ch. 26 - Prob. 26.1.1RQCh. 26 - Prob. 26.1.2RQCh. 26 - Prob. 26.1.3RQCh. 26 - Prob. 26.1.4PACh. 26 - Prob. 26.1.5PACh. 26 - Prob. 26.1.6PACh. 26 - Prob. 26.1.7PACh. 26 - Prob. 26.2.1RQCh. 26 - Prob. 26.2.2RQCh. 26 - Prob. 26.2.3RQ
Ch. 26 - Prob. 26.2.4RQCh. 26 - Prob. 26.2.5RQCh. 26 - Prob. 26.2.6PACh. 26 - Prob. 26.2.7PACh. 26 - Prob. 26.2.8PACh. 26 - Prob. 26.2.9PACh. 26 - Prob. 26.2.10PACh. 26 - Prob. 26.3.1RQCh. 26 - Prob. 26.3.2RQCh. 26 - Prob. 26.3.3RQCh. 26 - Prob. 26.3.4PACh. 26 - Prob. 26.3.5PACh. 26 - Prob. 26.3.6PACh. 26 - Prob. 26.3.7PACh. 26 - Prob. 26.3.11PACh. 26 - Prob. 26.3.12PACh. 26 - Prob. 26.3.13PACh. 26 - Prob. 26.3.14PACh. 26 - Prob. 26.3.15PACh. 26 - Prob. 26.4.1RQCh. 26 - Prob. 26.4.2RQCh. 26 - Prob. 26.4.3PACh. 26 - Prob. 26.4.4PACh. 26 - Prob. 26.4.5PACh. 26 - Prob. 26.4.6PACh. 26 - Prob. 26.5.1RQCh. 26 - Prob. 26.5.2RQCh. 26 - Prob. 26.5.3RQCh. 26 - Prob. 26.5.4PACh. 26 - Prob. 26.5.5PACh. 26 - Prob. 26.5.6PACh. 26 - Prob. 26.5.7PACh. 26 - Prob. 26.5.8PACh. 26 - Prob. 26.5.9PACh. 26 - Prob. 26.6.1RQCh. 26 - Prob. 26.6.2RQCh. 26 - Prob. 26.6.3PACh. 26 - Prob. 26.6.4PACh. 26 - Prob. 26.6.5PACh. 26 - Prob. 26.6.6PACh. 26 - Prob. 26.6.7PACh. 26 - Prob. 26.6.8PACh. 26 - Prob. 26.6.9PACh. 26 - Prob. 26.2RDECh. 26 - Prob. 26.3RDE
Knowledge Booster
Similar questions
- The following table gives the average nominal interest rates on six-month Treasury bills spanning the years 1971 and 1975, which determined the nominal interest rate paid by the U.S. government when it issued debt in that time period. The table also gives the inflation rate for the years 1971 to 1975. (All rates rounded to the nearest 0.1 percent.) Year 1971 1972 1973 INTEREST RATE (Percent) 1974 1975 8.0 Source: "FRED Economic Data," Federal Reserve Bank of St. Louis, last modified September 23, 2019, accessed September 24, 2019, https://fred.stlouisfed.org. 7.0 On the following graph, use the orange points (square symbol) to plot the nominal interest rates for the years 1971 to 1975. Next, use the green points (triangle symbol) to plot the real interest rates for those years. 6.0 5.0 4.0 3.0 2.0 1.0 0 -1.0 + -2.0 -3.0 Nominal Interest Rate (Percent) 4.5 4.5 7.2 1970 OOOO O 1971 O 1972 O 1973 8.0 O 1974 6.1 1971 O 1975 Inflation Rate (Percent) 4.2 3.3 6.3 11.0 9.1 1972 1973 YEAR 1974…arrow_forwardA typical consumption basket in Canada can be purchased for the following prices in two years: in Year 1, the price is $925; in Year 2, the price is $975. Calculate the Consumer Price Indexes for each year, it two ways: one using Year 1 as the base year, and the other using Year 2 as the base year. Then, calculate two inflation rates based on the two sets of price indexes you calculated. Compare the two inflation rates and discuss your result.arrow_forwardThe following table shows the average nominal interest rates on six-month Treasury bills between 1971 and 1975, which determined the nominal interest rate that the U.S. government paid when it issued debt in those years. The table also shows the inflation rate for the years 1971 to 1975. (All rates are rounded to the nearest tenth of a percent.) Year 1971 1972 1973 1974 1975 INTEREST RATE (Percent) Source: "Economic Report of the President (2007)," United States Government Printing Office, last modified February 1, 2007, accessed March 11, 2013, http://www.gpo.gov/fdsys/pkg/ERP-2007/pdf/ERP-2007.pdf. On the following graph, use the orange points (square symbol) to plot the nominal interest rates for the years 1971 to 1975. Next, use the green points (triangle symbol) to plot the real interest rates for those years. 8.0 7.0 6.0 5.0 4.0 1.0 -1.0 -2.0 -3.0 Nominal Interest Rate (Percent) 4.5 4.5 7.2 7.9 6.1 -4.0 1970 1971 1972 1973 1974 1971 1975 Inflation Rate (Percent) 4.4 3.2 6.2 11.0…arrow_forward
- Congratulations! Your boss has given you a raise. However, you want to know whether your purchasing power has actually increased, since inflation is rising as well. The table below gives you data for wages and the Consumer Price Index (CPI) for the last two years. Year 1 Year 2 Wage ($/day) $2,000 $2,100 The nominal percentage increase in your wage is%. (Round your answer to one decimal place.) The real percentage increase in your wage is%. (Round your answer to one decimal place.) CPI 115 128.8arrow_forwardGo to the website of Statistics Canada www statcan ca For each Go to the website of Statistics Canada (www.statcan.ca). For each of the past five years, find the inflation rate as measured by the consumer price index (all items)—sometimes called head-line inflation —and as measured by the CPI excluding food and energy—sometimes called core inflation. Compare these two measures of inflation. Why might they be different? What might the difference tell you about shifts in the aggregate supply curve and in the short-run Phillips curve? Go to the website of Statistics Canada www statcan ca For eacharrow_forwardThe following table shows the average nominal interest rates on six-month Treasury bills between 2004 and 2008, which determined the nominal interest rate that the U.S. government paid when it issued debt in those years. The table also shows the inflation rate for the years 2004 to 2008. (All rates are rounded to the nearest tenth of a percent.) Year 2004 INTEREST RATE (Percent) 2006 2007 2008 5.0 3.0 Source: "FRED Economic Data," Federal Reserve Bank of St. Louis, last modified September 23, 2019, accessed September 24, 2019, https://fred.stlouisfed.org. On the following graph, use the orange points (square symbol) to plot the nominal interest rates for the years 2004 to 2008. Next, use the green points (triangle symbol) to plot the real interest rates for those years. 28 1.0 2005 -16 -40 -40 Nominal Interest Rate Inflation Rate (Percent) 1.6 2003 3.4 4.8 4.4 1.6 2004 2005 2006 2007 2008 (Percent) 27 3.4 3.2 2.9 3.8 2006 YEAR Nominal Interest Rate Real Interest Rate (?) According to…arrow_forward
- Would excluding certain goods and services from CPI be beneficial for policymakers?arrow_forwardCalculating inflation using a simple price index Consider a fictional price index, the College Student Price Index (CSPI), based on a typical college student’s annual purchases. Suppose the following table shows the information on the market basket for the CSPI and the prices of each of the goods in 2017, 2018, and 2019. The cost of each item in the basket and the total cost of the basket are shown for 2017. Question1 In the last row of the table, calculate and enter the value of the CSPI for the remaining years. Between 2017 and 2018, the CSPI increased by_________% Between 2018 and 2019, the CSPI increased by__________% Question2 Which of the following, if true, would illustrate why price indexes such as the CSPI might overstate inflation in the cost of going to college? Check all that apply. A. Professors required each student to buy 10 textbooks, regardless of the price. B. The quality and design of calculators improved dramatically from 2017 to 2019. For…arrow_forwardWhat is the difference between the price level and the rate of inflation?arrow_forward
- Calculating inflation using a simple price index Consider a fictional price index, the college student Price index (CSPI), based on a typical college students annual purchases. Suppose the following table shows information on the market basket for the CSPI and the prices of each of the goods in 2010, 2011, and 2012. the cost of each item in the basket and the total cost of the basket are shown for 2010. Perform these same calculations for 2011 and 2012, and enter the results in the following table. 2010 2011. 2012 Quantity in baskets Notebooks 10 Calculators 1 Large coffees 150 Energy drinks 50 Textbooks. 10 Total cost. 5 Price index 5 2010. 2011. 2012 Price. Cost. Price Cost. Price Cost 5 50 7 11 100 100 110 140 1 150 1 1 2 100 3 4 100 1,000 120 150 5 1,400 5 5 5 100 5 5 Suppose the base year for this price index is 2010. In the last row of the table, calculate and enter the value of the CSPI for the remaining years. Between 2010 and 2011, CSPI increased by what percent? Between…arrow_forwardThe following are the CPI values in Hong Kong for 2009 to 2014 (recorded in December): Year CPI 2009 100 2010 102.9 2011 108.8 2012 112.9 2013 117.7 2014 123.4 i) Calculate the inflation rate in 2010, 2011, 2012, 2013, and 2014. 11) What is the inflation rate from 2009 to 2014? iii) If you held $1,000,000 in a safety box at home starting in 2009, what would its present value be in 2014?arrow_forward( please solve ASAP definitely I will give you thumbs up . Thanks you ) Rosa received a 2% raise at work and her coworker, Amy, received a 5% raise. Inflation is currently 2.6%. Did Rosa’s standard of living increase? Briefly explain your answer. List two flaws with using the consumer price index to measure inflation.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
Economics (MindTap Course List)
Economics
ISBN:9781337617383
Author:Roger A. Arnold
Publisher:Cengage Learning