Economics: Principles & Policy
14th Edition
ISBN: 9781337696326
Author: William J. Baumol; Alan S. Blinder; John L. Solow
Publisher: Cengage Learning
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Chapter 22.A, Problem 1TY
To determine
To deflate all five stock market values.
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As a first step in computing the consumer price index (CPI), a survey of consumers is done to determine the “basket of goods” purchased by a typical consumer. Suppose that 2009 is given as the base year and, consistent with the data shown in the table above, it was decided that the basket of goods in this economy should consist of one unit of food and two units of clothing.
I. Using 2009 as the base year,what is the CPI in each year: 2009, 2010, and 2011?
ii. What is the inflation rate in 2010 and 2011?
Q2. Go to the Statistics Canada website https://www150.statcan.gc.ca/t1/tbl1/en/tv.action?pid=1810000501 to view the annual average Consumer Price Index for Canada. Change the Reference period years from 1999 to 2021 and click Apply to see the updated data table. Answer the following questions and provide data and calculations where necessary
In which ways might the CPI data on food not accurately reflect what is really happening to prices in this product category?
Given the data in the above table, what is the price index for 1991, using 1988 as the base year and using the 1988 consumption pattern (market basket)?
Chapter 22 Solutions
Economics: Principles & Policy
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- 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%arrow_forward1. Calculating 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 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. Perform these same calculations for 2018 and 2019, and enter the results in the following table. 2017 2018 2019 Price Cost Price Cost Price Cost Quantity in Basket (Dollars) (Dollars) (Dollars) (Dollars) (Dollars) (Dollars) Notebooks 15 2 30 8 Calculators 1 70 70 100 130 Large coffees 250 2 500 2 Energy drinks 50 2 100 4 Textbooks 10 120 1,200 150 180 Total cost 1,900 Price index 100 Suppose the base year for this price index is 2017.arrow_forwardCongratulations! 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_forward
- The total price of purchasing a basket of goods in the United Kingdom over four years is: • year 1= £940, • year 2=£970, • year 3=£1000, • year 4=£1070. Calculate a price index for every year, with year 1 as the base year, so in the blanks, you will have: • Blank #1 = Price Index for Year 1 • Blank #2 = Price Index for Year 2 • Blank #3 • Blank #4 = Price Index for Year 4 %3D Price Index for Year 3 Round to one decimal places Blank # 1 Blank # 2 Blank # 3 Blank # 4arrow_forwardWould excluding certain goods and services from CPI be beneficial for policymakers?arrow_forwardWhat is the Consumer Price Index for 2016?arrow_forward
- A 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_forwardAssume that people in an economy only consume the following goods shown in the table: Rice Meat Juice Year 1 price P2 P4 P1 Year 1 quantity 100 100 200 Year 2 price P2 P6 P2 Year 2 quantity 100 100 200 Calculate the % change in the price of every goods. Using the same method with the CPI, calculate the % change of the overall price level. If you were to learn that juice increased in size from Year 1 to Year 2, should that information affects your calculation of the inflation rate? If so, how? If you were to learn that juice introduced new flavors in Year 2, should that information affect your calculation of the inflation rate? If so, how?arrow_forwardThe total price of purchasing a basket of goods in the United Kingdom over four years is: • year 1= £940, • year 2=£970, • year 3=£1000, • year 4=£1070. Calculate a price index for every year, with year 4 as the base year, so in the blanks, you will have: • Blank #1 • Blank #2 = Price Index for Year 2 Price Index for Year 1 Blank #3 = Price Index for Year 3 • Blank #4 = Price Index for Year 4 Round to one decimal places Blank # 1 Blank # 2 Blank # 3 Blank # 4arrow_forward
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