EBK BRIEF PRINCIPLES OF MACROECONOMICS
7th Edition
ISBN: 9780100469884
Author: Mankiw
Publisher: YUZU
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Question
Chapter 6, Problem 6PA
Subpart (a):
To determine
Identify the problem with
Subpart (b):
To determine
Identify the problem with CPI.
Subpart (c):
To determine
Identify the problem with CPI.
Subpart (d):
To determine
Identify the problem with CPI.
Subpart (e):
To determine
Identify the problem with CPI.
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The table shows the quantities of the goods Suzie
bought and the prices she paid during two consecutive
weeks.
Suzie's CPI market basket contains the goods she
bought in Week 1.
Calculate the cost of Suzie's CPI market basket in Week
1 and in Week 2.
What percentage of the CPI market basket is gasoline?
Calculate the value of Suzie's CPI in Week 2 and her
inflation rate in week 2.
The cost of her CPI market basket in Week 2 is $ 95.75.
>>> Answer to 2 decimal places.
Gasoline is 36.3 percent of the CPI market basket.
>>> Answer to 1 decimal place.
Week 1
Item
The cost of Suzie's CPI market basket in Week 1 is $ 103.25.
>>> Answer to 2 decimal places.
The value of Suzie's CPI in Week 2 is
>>> Answer to 1 decimal place.
Coffee
Books
Gasoline
Week 2
Item
Coffee
Books
Gasoline
Concert
Quantity
13 cups
1
15 gallons
Quantity
13 cups
2
5 gallons
1 ticket
Price
$2.75 a cup
$30.00 each
$2.50 a gallon
Price
$2.75 a cup
$15.00 each
$3.00 a gallon
$95 each
Which of the following statements about the CPI is true? How does the PCEPI differ from the CPI?
The CPI _______.
A.
has a bias of approximately 2.0 percentage points a year
B.
is a measure of the change in the amount of money that people need to spend to achieve a given standard of living
C.
measures all the changes in the cost of living
D.
is a relatively useless measure because every year new goods become available and some old goods disappear
The PCEPI _______.
A.
uses the same market basket as the CPI but gives a greater weight to sticky-price items
B.
introduces even more biases into the inflation rate than the CPI
C.
excludes the prices of food and energy
D.
uses the prices of goods and services included in the consumption expenditure component of GDP
The table shows the quantities of the goods Suzie bought and the prices she paid during
two consecutive weeks.
Suzie's CPI market basket contains the goods she bought in Week 1.
Calculate the cost of Suzie's CPI market basket in Week 1 and in Week 2.
What percentage of the CPI market basket is gasoline?
Calculate the value of Suzie's CPI in Week 2 and her inflation rate in week 2.
The cost of Suzie's CPI market basket in Week 1 is $
>>> Answer to 2 decimal places.
m
Week 1
Item
Coffee
Books
Gasoline
Week 2
Item
Coffee
Books
Gasoline
Concert
Quantity
8 cups
1
25 gallons
Quantity
8 cups
4
15 gallons
1 ticket
Price
$4.00 a cup
$25.00 each
$2.00 a gallon
Price
$4.00 a cup
$12.50 each
$2.50 a gallon
$95 each
Chapter 6 Solutions
EBK BRIEF PRINCIPLES OF MACROECONOMICS
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Similar questions
- Please solve weeks 1 and 2 percentage of the CPI market basket.arrow_forwardWhich of the following statements is true if the CPI rises from 120 to 126? If the CPI rises from 120 to 126, then _______. A. on average, the price paid by urban consumers for a fixed basket of consumer goods and services rises by 5 percent B. on average, the price paid by urban consumers for a fixed basket of consumer goods and services rises by 6 percent C. the price of food rises by 6 percent D. the price of housing rises by at least 5 percentarrow_forwardIn each scenario, determine the effects on the CPI and the GDP deflator. Armani raises the price of the Italian jeans it sells in Saudi Arabia.arrow_forward
- In 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_forwardMr. G says that “A 20% increase in the price of salt has a greater impact on the CPI than a 20% increase in the price of dark chocolate”. With proper reasoning state whether you agree with this statement or not.arrow_forwardSuppose the price of a quart of milk rises from $1.00 to $1.20 and the price of a T-shirt rises from $8.00 to $9.60. If the CPI rises from 150 to 195, then people likely will buy (Note that this is not a two goods economy anymore) a.more milk and more T-shirts. b.more milk and fewer T-shirts. c.less milk and more T-shirts. d.less milk and fewer T-shirts. Suppose the price of a gallon of ice cream rises from $4 to $5 and the price of a can of coffee rises from $2 to $2.50. If the CPI rises from 150 to 177, then people likely will buy a.more ice cream and more coffee. b.more ice cream and less coffee. c.less ice cream and more coffee. d less ice cream and less coffee. Can you please explain how we got answer a for the first question and d for the second one. Thank you.arrow_forward
- How does commodity subsitution bias influence the CPI? The CPI ____ consumer subisuttions between goods, so when the price of carrots rises and consumers switch to broccoi, the CPI ____ the rise in the price of vegetables. A. ignores; overstates B. incorporates; correctly measures C. ignores; correctly measures D. incorporates; overstatesarrow_forwardPlease calculate CPI and inflation using the following basket of goods (round outlays [for calculations] and all other answers to the second decimal place when necessary) Goods Average Qty Avg. Price 2021 Clothing 15 $200 Cell Phone Plan 11 $75 Housing 10 $1,250 Milk 30 $3 Streaming Services 22 $19 Vehicle Payments 10 $450 BASE YEAR OUTLAY = $14,000.00 2020 CPI = 147 What is the 2021 CPI? What was the inflation rate from 2020 to 2021?arrow_forwardCalculate the CPI, based on the following information. You must show your work to get full credit. Just providing the answer will result in a 0. Portion of Category Budget Old Price New Price Housing 50% $ 3,500 $ 3,750 2,500 $ 2,800 1,200 $ 1,900 Food 25% Transportation 25% $arrow_forward
- Economists in the Statistics Bureau decide to check the CPI substitution bias. To do so, they conduct a Consumer Expenditure Survey in both 2018 and 2019. The table shows the results of the survey. It shows the items that consumers buy and their prices. 2018 2019 Item Quantity Price Quantity Price The Statistics Bureau fixes the reference base year as 2018. Burgers 30 $1 35 $1 Chicken 35 $4 25 $6 Calculate the CPI in 2019 if the CPI basket contains the 2019 quantities. The CPI in 2019 if the CPI basket contains the 2019 quantities is >>> Answer to 1 decimal place. Question Viewer Enter your answer in the answer box. MacBook Air DII DD F11 F10 000 000 888 F9 80 F7 F8 F6 F5 F4 F3 esc F2 F1 & % ! @ 6 7 8 2 3 4 5 1 | P Y U Q W E R tab K 云 00 %24arrow_forwardThe table below presents some data on the federal minimum wage and the CPI for several years. Fill in the column for “minimum wage in 2020 $s." Year Minimum wage CPI Minimum wage in 2020 $s 1949 $0.40 23.8 1968 $1.60 34.8 1995 $4.25 152.4 2020 $7.25 259.1 2024 (proposed) $15 306 (projected) What was the 1949 minimum wage equivalent to in 2020 $s?arrow_forwardThe table below presents some data on the federal minimum wage and the CPI for several years. Fill in the column for "minimum wage in 2020 $s." Year Minimum wage CPI Minimum wage in 2020 $s 1949 $0.40 23.8 1968 $1.60 34.8 1995 $4.25 152.4 2020 $7.25 259.1 2024 (proposed) $15 306 (projected) What was the 1949 minimum wage equivalent to in 2020 $s? 4.35 QUESTION 7 Many people have proposed raising the minimum wage in increments so that it is $15 by 2024. Some people say that this $15 minimum wage would restore the purchasing power that the minimum wage used to have. Others say it would make the minimum wage higher, in real terms, that it has ever been before. What is the best evaluation of these claims? O the $15 minimum wage would have more purchasing power than any other year in the table O the $15 minimum wage is lower, in real terms, than most of the other years in the table O the $15 minimum wage would be the second highest in real terms (1968 is the highest) O there isn't enough…arrow_forward
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