Macroeconomics (Fourth Edition)
4th Edition
ISBN: 9780393603767
Author: Charles I. Jones
Publisher: W. W. Norton & Company
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Question
Chapter 8, Problem 3E
(a)
To determine
Graphical representation of the inflation rate for China and India.
(b)
To determine
Calculate the average inflation rate of each country.
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Calculative an Inflation Rate. A country reports a price index of 55 in 2005 and 60 in 2006. What is the inflation rate between 2005 and 2006? Answer as a percentage and round to two decimal places (xx.xx%).
Now you see what the BLS economist do, except with a more complex basket of goods. Now try to construct an index and determine the inflation rate on your own.
The table shows the prices of fruit purchased by the typical college student from 2001 to 2004. What is the amount spent each year on the “basket” of fruit with the quantities shown in column 2? (5 points)
Items
Qty.
2001
2002
2003
2004
Price
Amount Spent
Price
Amount Spent
Price
Amount Spent
Price
Amount Spent
Apples
10
$0.50
$0.75
$0.85
$0.88
Bananas
12
$0.20
$0.25
$0.25
$0.29
Grapes
2
$0.65
$0.70
$0.90
$0.95
Raspberries
1
$2.00
1.9
2.05
2.13
$2.13
Total
Construct the price index for a “fruit basket” in each year using 2003 as the base year. (5 points)
Compute the inflation rate…
Study the associated figure. Adjusted for inflation, during which years during the period shown did the lowest gasoline prices occur?
A) Gas was cheapest in 1998 - 1999 because the graph shows that the actual price of a gallon of gas was at its lowest in that time period.
B) Gas was cheapest in 1998 - 1999 because the graph shows that the price of a gallon of gas in 2016 dollars was at its lowest in that time period.
C) Gas was cheapest in 1980 - 1982 because the graph shows that the price of a gallon of gas in 2016 dollars was at its lowest in that time period.
D) Gas was cheapest in 1950 - 1952 because the graph shows that the price of a gallon of gas in 2016 dollars was at its lowest in that time period.
Chapter 8 Solutions
Macroeconomics (Fourth Edition)
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