Study Guide for Mankiw's Brief Principles of Macroeconomics, 7th
7th Edition
ISBN: 9781285864266
Author: N. Gregory Mankiw
Publisher: Cengage Learning
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Question
Chapter 6, Problem 2QCMC
To determine
Thelargest component ofCPI’s basket.
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The market basket used to calculate the CPI in Aquilonia is 4 loaves of bread, 6 gallons of milk, 2 shirts, and 2 pairs of pants. In 2005, bread cost $1.00 per loaf, milk cost $1.50 per gallon, shirts cost $6.00 each, and pants cost $10.00 per pair. In 2006, bread cost $1.50 per loaf, milk cost $2.00 per gallon, shirts cost $7.00 each, and pants cost $12.00 per pair. Using 2005 as the base year, what was Aquilonia’s inflation rate in 2006?
This question is stumping me. I thought that this answer was 124.4 but it seems that it is 24.4. I cant figure it out
In a simple economy, people consume only two goods: food and clothing. The market basket of goods used to compute the CPI has 40 units
of food and 20 units of clothing.
Food
Clothing
Last year's price
$10
$ 18
This year's price
$14
$21
a)
What are the percentage increases in the price of food? Number
b)
What are the percentage increases in the price of clothing? Number
c)
What is the percentage increase in the CPI? Number
Describe how the CPI is calculated. How might the CPI overstate the true increase in cost of living?
Chapter 6 Solutions
Study Guide for Mankiw's Brief Principles of Macroeconomics, 7th
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- The largest component in the basket of goods andservices used to compute the CPI isa. food and beverages.b. housing.c. medical care.d. apparel.arrow_forwardBasket Items Unit $ per unit (2020) $ per unit (2021) $ per unit (2022) Cougar Tail 1 donut $5 $4.50 $4.25 Mint Brownie ½ sheet $29.98 $34.99 $39.99 Graham Canyon ice cream 5 quarts $14.99 $16.49 $17.99 Calculate the CPI for each year, using 2020 as the base year.arrow_forwardIn a simple economy, people consume only two goods: food and clothing. The market basket of goods used to compute the CPI has 50 units of food and 10 units of clothing. Food Clothing Last year's price $4 $8 This year's price $6 $16 a. What are the percentage increases in the price of food and in the price of clothing? b. What is the percentage increase in the CPI? c. Do these price changes affect all consumers to the same extent? Explainarrow_forward
- What is the relationship between GDP, inflation, and CPI?arrow_forwardIn a simple economy, people consume only 2 goods, food and clothing. The market basket of goods used to compute the CPI consists of 50 units of food and 10 units of clothing. Food Clothing 2002 price per unit $4 $10 2003 price per unit $6 $20 a. What are the percentage increases in the price of food and in the price of clothing? b. What is the percentage increase in the CPI? c. Do these price changes affect all consumers to the same extent? Explainarrow_forwardexplain four main differences between the GDP Deflator and CPI, with one example for each difference.arrow_forward
- Which goods are supposed to be included in the CPI? Group of answer choices All goods and services that typical consumers buy. All goods and services produced in the economy. All goods and services in the consumption component (C) of the GDP. All the goods, but not the services, in the consumption component (C) of the GDP.arrow_forwardWhat is the relationship between real GDP and CPIarrow_forwardTennis Balls Golf Balls Bottles of Gatorade 2020 price Rs.250 Rs.450 Rs.150 2020 quantity 100 100 200 2021 price Rs.25 Rs.653 Rs.255 2021 quantity 100 100 200 Using a method similar to the CPI, compute the percentage change in the overall price levelarrow_forward
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