Let CPI, represent CPI in period t and let CPI₁+1 represent the CPI in period t + 1. CPI inflation is calculated as (CPI₁+1-CPI) O A. CPI₁+1 (CPIt+1-CPI) B. CPIt CPI₁+1 CPI₁ C. O D. CPlt+1 (CPI₁+1-CPI) What are some reasons why CPI inflation may overstate true inflation? (Select all that apply.) A. The CPI may not account for improved quality of goods and services. B. The CPI does not account for substitution away from relatively more expensive goods to relatively cheaper goods. C. The CPI measures quantities of goods, not prices of goods, and, thus, does not measure inflation accurately D. The CPI includes imported goods, which are not relevant to domestic inflation. E. The CPI does not include the prices of intermediate goods and raw materials.

Let CPI, represent CPI in period t and let CPI₁+1 represent the CPI in period t + 1. CPI inflation is calculated as (CPI₁+1-CPI) O A. CPI₁+1 (CPIt+1-CPI) B. CPIt CPI₁+1 CPI₁ C. O D. CPlt+1 (CPI₁+1-CPI) What are some reasons why CPI inflation may overstate true inflation? (Select all that apply.) A. The CPI may not account for improved quality of goods and services. B. The CPI does not account for substitution away from relatively more expensive goods to relatively cheaper goods. C. The CPI measures quantities of goods, not prices of goods, and, thus, does not measure inflation accurately D. The CPI includes imported goods, which are not relevant to domestic inflation. E. The CPI does not include the prices of intermediate goods and raw materials.

Brief Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter12: Money Growth And Intlation

Section: Chapter Questions

Problem 6PA

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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, and year 4=1070. Calculate two price indices, one using year 1 as the base year (set equal to 100) and the other using year 4 as the base year (set equal to 100). Then, calculate the inflation rate based on the first price index. If you had used the other price index, would you get a different inflation rate? If you are unsure, do the calculation and find out.
The index number representing the price level changes from 110 to 115 in one year and then from 115 to 120 the next year. Since the index number increases by five each year, is five inflation rate each year? Is the inflation rate the same each year? Explain your answer.
Describe a situation, either a government policy situation, an economic problem, or a private sector situation, where using the GDP deflator to convert from nominal to real would be more appropriate than using the CPI.
13. Which of the following cannot be used to measure inflation?a) GDP deflationb) Expenditure methodc) Producer price indexd) Consumer price indexWhich of the following equations in correct?a) Nominal interest rate = Real interest rate-Inflationb) Real interest rate = Nominal interest rate + inflationc) Real interest rate = Nominal interest rate x inflationd) Real interest rate = Nominal interest rate-inflation
Suppose the CPI was 110 last year and is 121 this year. Instructions: In part a enter your answer as a whole number, in part b round your answer to 1 decimal place. What is this year's rate of inflation? ( in percentage) In contrast, suppose that CPI was 110 last year and is108 this year. What is this year's rate of inflation? What termin do economists use to describe this second outcome? ( inflation or deflation)
If the CPI in year one is 112 and in year 2 it is 118, we can say that consumer prices rose by about blank . During the inflationary period if a worker received a 3% pay raise when the inflation rate was 7%, it means that the worker’s real wage fell by . Similarly for the economy, if the price level rose by 4% and the nominal output rose by 9%, then the economy’s real output has risen by . If the price of housing (which accounts for 40% of total expenditures in the CPI basket) also rose by 4% while the prices of all the other goods in the CPI basket remained constant, then the CPI would have risen by .
If the inflation rate is 6% and Susan receives a 6% increase in income, then, overthe year, Susan’s: (a) Real and nominal income both remain unchanged; (b) Real and nominal income both rise; (c) Real income rises but nominal income remains unchanged; (d) Nominal income rises but real income remains unchanged.
The CPI tracks the average change in prices of a basket of goods and services overtime, whereas the UNRATE is the percentage of the labour force that is unemployed.By examining the cointegration between these two variables, you can gain insightsinto the relationship between inflation and unemployment in the US economy. Thequarterly series is complete and seasonally adjusted. a) From a theoretical perspective, are these two series expected to becointegrated? Justify your answer. b)How do expectations about future economic conditions influence the speed ofadjustment? Are there any other factors that might affect the speed of adjustment?
2) a. If actual inflation is more than expected inflation, which of the following groups will most certainly benefit? a. Lenders b. Borrowers c. Minorities d. Women e. Men b. Suppose that the consumer price index of a country was 160 at year-end 2004 and 168 at the end of 2005. What was the country’s inflation rate during 2005? a.5 percent b.8 percent c.60 percent d.68 percent c. If the consumer price index (CPI) at the end of year one was 100 and was 108 at the end of year two, the inflation rate during year two was a.zero; the CPI of 100 indicates that prices were stable. b.8 percent. c.5 percent. d.108 percent.
Suppose that the nominal GDP in 2017 was $3,968 (in thousands) and 2018 is the base year. Nowthe nominal GDP for years 2018 and 2019 will be the sum of the nominal GDP of the previousyear and the cost-of-living adjustment (COLA.) for the current year. [COLAs per year are equalto the percentage increase of the rate of inflation.] When we calculate the nominal GDP this way,what is this economy’s real GDP each year?
Suppose your nominal income rose by 5.3 percent and the price level rose by 3.8 percent in some year. Instructions: Round your answers to 1 decimal place. 1).By what percentage would your real income (approximately) increase? 2). If your nominal income rose by 2.8 percent and your real income rose by 1.1 percent in some year, what must have been the (approximate) rate of inflation? ( in percentage)
Q.1.5 If the inflation rate is 6% and Susan receives a 6% increase in income, then, overthe year, Susan’s:(2)(a) Real and nominal income both remain unchanged;(b) Real and nominal income both rise;(c) Real income rises but nominal income remains unchanged;(d) Nominal income rises but real income remains unchanged.