Principles of Macroeconomics
6th Edition
ISBN: 9780073518992
Author: Robert H. Frank, Ben Bernanke Professor, Kate Antonovics, Ori Heffetz
Publisher: McGraw-Hill Education
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Question
Chapter 5, Problem 7P
To determine
Calculate the change in the real price and
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The Consumer Price Index (CPI) is a measure of the
average change in price over time from a designated
reference period, at which it equals 100. The index is
based on prices of basic consumer goods and services.
The table provided lists the CPI for several years from
1960 to 2012. If the price change in cars parallels the
change in the CPI, what would a car sell for (to the
nearest dollar) in 2012 if a comparable model sold for
$7,500 in 1999?
Year
CPI
1960
29.6
1973
1986
44.4
109.6
156.9
1999
2012
229.6
In 2012, a car would sell for approximately $ 58,176
(Round to the nearest dollar.)
Suppose an economy consumes only two goods: food and entertainment. The following table shows quantities consumed and prices for three years: Year 0 (the base year), Year 1, and Year 2.
QUESTION; compute inflation rates (from year 0 to year 1 and from year 1 to year 2) based on GDP deflator
Item
Year 0
Year 1
Year 2
Quantity (units)
Price
($ / unit)
Quantity (units)
Price
($ / unit)
Quantity (units)
Price
($ / unit)
Food
50
5
75
6
80
4
Entertainment
100
12
110
11
115
14
You are now required to compute the consumer price index (CPI) and the inflation in one village. To do this task, you go to that village to collect data of households’ consumption in that village. After collecting data, you find that households in this village consume a standard basket of 3kg of rice, 1.5kg of meat and 3kg of vegetable and the prices of these products are given below:
a) CPI in Jan 2017, in Feb 2017, and in Mar 2017 by taking Jan 2017 as the base month.b) Inflation rate from Feb to Mar 2017
Chapter 5 Solutions
Principles of Macroeconomics
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