MACRO ECON 6
6th Edition
ISBN: 9780357689820
Author: MCEACHERN
Publisher: CENGAGE L
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Question
Chapter 6, Problem 8P
To determine
New
Concept introduction:
Consumer price index (CPI): It is a measure of average change in prices over the period of time.
Formula of CPI: Prices of basket of goods in given year /prices of basket of goods in base year*100
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The following table lists the per gallon prices of gas and milk for the months of April, May, and June. Assume that the typical consumer buys 60 gallons of gas and 4 gallons of milk each month, and that April is the base period. What is the consumer price index for May?
Calculate a new consumer price index for the data in the following exhibit. Assume that current-year prices of Twinkies, fuel oil, and internet are $0.95/package, $1.25/gallon, and $15.00/month, respectively. Calculate the current year’s cost of the market basket and the value of the current year’s price index. What is this year’s percentage change in the price level compared to the base year?
Product
(1)
Quantity in Market Basket
(2)
Prices in Base Year
Twinkies
365 packages
$ 0.89/package
Fuel oil
500 gallons
1.00/gallon
Internet
12 months
30.00/month
Table 24-3
The table below lists the per pound prices of meat and potatoes for the months of January, February, and March. Assume that the typical consumer buys 25 pounds of meat and 15 pounds of potatoes each month, and that January is the base period.
10. Refer to Table 24-3. Calculate the cost of a basket of goods for each month.
11. Refer to Table 24-3. Calculate the consumer price index for February and March.
12. Refer to Table 24-3. Calculate the inflation rate for February.
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