Econ Macro (book Only)
6th Edition
ISBN: 9781337408745
Author: William A. McEachern
Publisher: Cengage Learning
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Question
Chapter 6, Problem 8P
To determine
New
Concept introduction:
Consumer price index (CPI): It is a measure of average change in prices over the period of time.
Formula of CPI: Prices of basket of goods in given year /prices of basket of goods in base year*100
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Calculate a new consumer price index for the data in the following exhibit. Assume that current-year prices of Twinkies, fuel oil, and internet are $0.95/package, $1.25/gallon, and $15.00/month, respectively. Calculate the current year’s cost of the market basket and the value of the current year’s price index. What is this year’s percentage change in the price level compared to the base year?
Product
(1)
Quantity in Market Basket
(2)
Prices in Base Year
Twinkies
365 packages
$ 0.89/package
Fuel oil
500 gallons
1.00/gallon
Internet
12 months
30.00/month
Table 24-3
The table below lists the per pound prices of meat and potatoes for the months of January, February, and March. Assume that the typical consumer buys 25 pounds of meat and 15 pounds of potatoes each month, and that January is the base period.
10. Refer to Table 24-3. Calculate the cost of a basket of goods for each month.
11. Refer to Table 24-3. Calculate the consumer price index for February and March.
12. Refer to Table 24-3. Calculate the inflation rate for February.
A hypothetical country of Narnia produces only movies and popcorn. Quantities and prices of these goods
for the last several years are shown in the following table. The base year is 2017.
Year
2016
2017
2018
2019
Price
(Dollars per movie)
7.6%
7.5%
Movies
7.2%
7%
10.00
11.00
12.00
12.00
Quantity
Quantity
(Movies) (Dollars per bag) (Bags)
500
600
650
625
Popcorn
Refer to Table 23-5. What was the rate of inflation for Narnia in 2019? (Hint: round-off to the nearest
decimal point)
Price
5
4
5
6
1,000
900
950
925
Chapter 6 Solutions
Econ Macro (book Only)
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