Answered: The use of chain-weighted CPl when…

The use of chain-weighted CPl when calculating the inflation rate reduces substitution bias as compared to raw/unadjusted CPI. O True False

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter22: Inflation

Section: Chapter Questions

Problem 37P: Rosalie the Retiree knows that when she retires in 16 years, her company will give her a one-time...

See similar textbooks

Related questions

Q: At full employment, the expected inflation rate is A. higher than the inflation rate O B. equal to…

A: Full employment refers to an economic condition in which all available labour resources are being…

Q: If the rate of Inflation is 14 percent per year, the price level will double In about Multiple…

A: Given, Rate of inflation = 14%

Q: Suppose there's an unanticipated increase in the rate of inflation. Which of the following is likely…

A: Inflation refers to an increase in the price of the goods and service in the economy. If there is a…

Q: Assuming the nominal interest rate is positive, ceteris paribus, which of the following statements…

A: The interest rate in economics is the amount of payment that a lender charges on a borrower in order…

Q: Suppose that the price of good 1 increases. The amount of additional income a consumer requires to…

A: When the price of the good increases, the consumer would definitely shift to the other good but he…

Q: The following table gives the most recent year-over-year CPI data from ERED. *Real-ime data provided…

A: Here we calculate the inflation rate by using the CPI value of the followings year so here…

Q: If median weekly earnings of $865 were to increase by 9%. at a time when the inflation rate were to…

A: given that, median weekly earnings of $865 increase by 9% the inflation rate was to drop by 4%

Q: Let's assume that a price index goes up from 250 to 255, then the rate of inflation in percentages…

A: Inflation rate is the percentage change in average price level of goods and services.

Q: A consumer expenditure survey reports the following information on consumer spending: 2020…

A: Cost of the basket, 2020 = 10 x 7 + 6 x 10 + 12 x 5 = 70 + 60 + 60 = 190 Cost of the basket, 2021 =…

Q: Suppose the nominal interest rate is curently 2.4 per cent and expectec inflation is 16 per cent. I…

A: The fisher effect refers to the economic analysis of the relationship between real interest rate,…

Q: What index is used to measure the average prices paid by a typical family? An average of the prices…

A: * SOLUTION :- *An average of the prices goods and services purchased by a typical family is the…

Q: Which of these statements is true about inflation? O a. It shows changes in the general prices of…

A: "Since you have asked multiple questions, we will solve first question for you .. If you want any…

Q: Inflation Inflation Rate Year CPI (percent) 1931 15.8 1932 14.0 1933 13.3 1946 20.1 1947 23.2 1948…

A: Inflation is the rate at which the the value of a currency is falling and consequently the general…

Q: Earning the nominal return: Suppose the inflation rate is 5%. Suppose the marginal product of…

A: Nominal return indicates the return from an investment including taxes and effects of inflation.

Q: Which of these statements best describes what inflation rate is? a. Inflation rate is useful for…

A: 1-Labor Force Participation rate is used to measure labor force. The first option is incorrect. 2-…

Q: If you currently make $25,000 a year and the CPI rises from 110 today to 150 in five years, then you…

A: Inflation refers to the increase in the price level in an economy from one period to another.…

Q: If ten years ago the prices of the items bought last month by the average consumer would have been…

A: Here, it is given that the price of the items bought by a consumer in ten years ago was much lower…

Q: Complete the following table by computing the percentage change in price for each of the three…

A: Consumer Price Index Inflation (CPI Inflation) measures the % change in the price range of certain…

Q: Suppose that the price of bananas rises by 30%. This will have the largest impact on which measure…

A: Hi! Thank you for the question As per the honor code, We’ll answer the first question since the…

Q: Say that the price of a representative basket of consumer goods and services in a hypo- thetical…

A: Price index: It refers to the measures that take a weighted average of the price of a basket of…

Q: Which of the following statements explains inflation rate? a. Inflation rate is expressed per 1000…

A: Inflation rate measures the change in the price level of output through out the period. Basically…

Q: You lend $1,012 to a friend and he agrees to pay you back next year plus he will pay you interest of…

A: Given:Principal=$1,012Rate of interest=7.25%Period=1 year

Q: The CPI understates true inflation because it does not take into account consumers' ability to…

A: Inflation is the increase in general price levels in an economy from one period to another.…

Q: Use the following data: Base Inflation Rate = .4% Shortfall = 10% of Y, Shock Inflation Rate = 3%…

A: Given : Base inflation rate=0.4% shortfall=10% of Yp shock inflation rate =3%

Q: Assume that last year's inflation rate is the same as the expect O A. decreases. O B. increases. C.…

A: The correct answer is option C. The phillips curve equation is : π = πe - €(U - U*) where U* =…

Q: What is the inflation free (real interest rate) if the market rate is 12.6% and the inflation rate…

A: The interest rate which is calculated without taking in account the value of inflation is known as…

Q: The Consumer Price Index (CPI) of one particular country can be modeled by I(t) =-0.043f3+0.99t²…

A: We are going to calculate Consumer Price Index and Inflation rate to answer this question.

Q: CPI inflation in India rose to 4.9% y-o-y in November from 4.5% in October, below expectations…

A: The Consumer Price Index is a weighted average of prices for a basket of consumer goods and services…

Q: Consider a simple economy that only produces: pencils, t-shirts, and bananas. Using the information…

A: Inflation: Inflation is an economic concept that is defined as a rise in the general price level of…

Q: If the nominal interest rate is 8% and the inflation rate is 5%. Using the relevant real interest…

A: Given that, Nominal interest rate = 8% or 0.08 Inflation rate = 5% or 0.05 Present value (PV) =…

Q: Becky and her employer both expected inflation to be 4% between 2012 and 2013, so they agreed, in a…

A: Nominal wage = Real wage + Inflation rate

Q: It is known that in an economy the standard basket is compound according to this table: Year Food…

A: Given,

Q: How many years will it take for the dollar's purchasing power to be one-thirdwhat it is now, if the…

A: The future value of money can be calculated by the formula, F = P (1+r)n where F is the future…

Q: If energy prices increased 20%, you would expect the largest inflation increase in which of the…

A: Inflation refers to the situation of increasing price level in the economy.

Q: A rise in the general level of prices is called: deflation O compounding annexation O inflation

A: In a market, general price is considered as macroeconomic component that has a significant impact on…

Q: There are no costs associated with inflation if the inflation rate is perfectly anticipated. Select…

A: Inflation is responsible for the rise in price levels over time. The quantity of a good would…

Q: The cost of the CPI basket in base-period prices is $200 and the cost of the CPI basket in…

A: The Consumer Price Index (CPI) measures the average change in prices over time that consumers pay…

Q: The GDP deflator in year 4 is 120 and the GDP deflator in year 5 is 130. The rate of inflation…

A: In given we have to find the rate of inflay between years 4 and 5 ?

Q: CPI inflation in India rose to 4.9% y-o-y in November from 4.5% in October, below expectations…

A: Aggregate supply is an economy's gross domestic product , or the total amount of goods and services…

Q: The CPI for "All Items" was 249.554 in March 2018, and 254.202 in March 2019. Over this period, the…

A: Since you have asked multiple question, we will solve the first question for you. If youwant any…

Q: Suppose that James's income in Year 1 was $45,000. Over the next four years his income increases by…

A: The nominal income in first year = $45,000 The income increased every year by = 7% = 0.07 The…

Q: CPI inflation in India rose to 4.9% y-o-y in November from 4.5% in October, below expectations…

A: The entire amount of goods and services that enterprises are willing to sell at a given price in an…

Q: As of July 2012, the 12 month CPI inflation rate was 1.4 percent and the 12 month core CPI inflation…

A: Inflation is the general increase in the price level of goods and services. One of the measure to…

Q: Suppose a market basket has a value of $400 in 2019 and $420 in 2020. According to this, the rate of…

A: Price rises at an increasing rate over a specific period of time, which is described as the rate of…

Q: In Zimbabwe the increase charge of the quantity of coins prolonged from fifty percent a year to…

A: Macroeconomics is a part of economics that deals with production, decision and allocation concerning…

Q: Consider Table 2 above. Calculate the US inflation rate from 2003 to 2004. (round to two decimal…

A: Inflation rate can be able to identify by using the current and previous year cpi data.

Question

The use of chain-weighted CPI when calculating the inflation rate reduces substitution bias as
compared to raw/unadjusted CPI.
True
False

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

This is a popular solution!

SEE SOLUTION Check out a sample Q&A here

Step 1

Step 2

Step 3

Step 4

Trending now

This is a popular solution!

Step by step

Solved in 4 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

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.
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.
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.
Rosalie the Retiree knows that when she retires in 16 years, her company will give her a one-time payment of 20,000. However, if the inflation rate is 6 per year, how much buying power will that 20,000 have when measured in todays dollars? Hint: Start by calculating the rise in the price level over the 16 years.