x, the College Student Price Index (CSPI), based on a typical college student’s annual purchases. Suppose the following table shows the 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.
x, the College Student Price Index (CSPI), based on a typical college student’s annual purchases. Suppose the following table shows the 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.
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 5PA
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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 the 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.
Question1
In the last row of the table, calculate and enter the value of the CSPI for the remaining years.
Between 2017 and 2018, the CSPI increased by_________%
Between 2018 and 2019, the CSPI increased by__________%
Question2
Which of the following, if true, would illustrate why price indexes such as the CSPI might overstate inflation in the cost of going to college? Check all that apply.
A. Professors required each student to buy 10 textbooks, regardless of the price.
B. The quality and design of calculators improved dramatically from 2017 to 2019. For example, calculators made in 2019 accept memory cards, whereas those made in 2017 do not, but this quality change is hard to measure.
C. As the price of textbooks increased, more and more students turned to the used-book market or chose not to buy textbooks at all, instead using the copies on reserve in the library
D. A new, safe method of memory enhancement became available for purchase.
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