Principles of Macroeconomics Plus MyLab Economics with Pearson eText (1-semester access) -- Access Card Package (12th Edition)
12th Edition
ISBN: 9780134424026
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 7, Problem 2.4P
To determine
Minimum wage in indexation.
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Suppose the CPI is 120 in year 1 and 150 in year 2. If First National Bank charges a nominal interest rate of 30 percent in year 2, what is the bank's real interest rate? Explain.
Explain why changes in the cost of living for any particular individual or family may differ from changes in the official cost-of-living-index, the CPI.
why changes in the cost of living for any particular individual or family may differ from changes in the official cost of living index, the CPI
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Principles of Macroeconomics Plus MyLab Economics with Pearson eText (1-semester access) -- Access Card Package (12th Edition)
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- Use the following table to answer the question. The table shows the prices and the quantities consumed in Vegetarian Country. Suppose the base year is 2020. Also, suppose that 2020 is the year the typical consumption basket was determined, so the quantities consumed in 2020 are the only quantities needed to calculate the CPI in each year. Year Price of Carrots Quantity of Carrots Price of Celery Quantity of Celery 2020 $2.00 100 $1.00 100 2021 2.50 90 0.90 120 2022 2.75 105 1.00 130 What are the values of the CPI in 2020, 2021, and 2022, respectively? a. 2020: 100; 2021: 111; 2022: 139.6 b. 2020: 100; 2021: 109.2; 2022: 116 c. 2020: 100; 2021: 113.3; 2022: 125 d. 2020: 83.5; 2021: 94.2; 2022: 100 e. None of the answer choices are correct.arrow_forwardSuppose that a typical market based in Japan consists of 200 Apples and 290 Textbooks. The table below shows data on prices for Apples and Textbooks in Japan for three years.Year Price of Apples Price of Textbooks2014 $1.40 2002015 $1.10 1402016 $1.10 200Assume that the base year is 2015. Given this data, what is the price of the basket in 2014? What is the price of the basket in 2015? What is the price of the basket in 2016? What is CPI in 2014? 2015? 2016? What is the inflation rate between 2014 and 2015? What is the inflation rate between 2015 and 2016?arrow_forwardIn 1954, Canadian Prime Minister Louis Stephen St. Laurent was paid a salary of $15 000. Stephen Harper, the Prime Minister in 2012, was paid $157 731. The price index for 1954 is 14.1 and the price index for 2012 is 121.7. What is, approximately, Prime Minister St. Laurent's salary equivalent in 2012 dollars? Help me.arrow_forward
- A typical consumer in Lykesville has a market basket consisting of 2 blueberries, 9 peaches, and 10 apples. The data table below provides information on Lykesville’s prices of blueberries, peaches, and apples from 2013 through 2015. 2013 2014 2015Price per unit of blueberries $1.9 $1 $1.7Price per unit of peaches $2.15 $1.25 $1.85Price per unit of apples $2.4 $1.75 $2.3 What is the CPI for 2014 and 2015? Annual inflation (%) for 2014 and 2015?arrow_forwardIn 2020, an adult season pass lift ticket for Devil's Head Ski Resort in Merrimac, WI costs $429. If lift ticket prices have grown proportionally to the Consumer Price Index (see table), what would a season pass have cost in the year 2014? Year CPI Index 2000 172.2 2003 184.0 2005 195.3 2009 214.5 2012 229.6 2014 236.7 2015 237.0 2016 240.0 2017 245.1 2018 251.1 2019 255.7 2020 259.9 Round your answer to the nearest whole dollar amount.arrow_forwardThe CPI’s basket of goods includes potato chips, over half of which are made from potatoes grown in Idaho. Wildfires this summer destroyed acres of potato crops in Idaho, causing a spike in the price of potatoes, and there was a 30% increase in the price of potato chips. As a result, the CPI calculation showed an increase of 2% in the Fall of this year versus last year. Please explain if this 2% increase is reflective of the overall price level, and if not, why?arrow_forward
- In 2014, the cost of a market basket of goods was $2,000. In 2016, the cost of the same market basket of goods was $2,100. Use the price index formula to calculate the price index for 2016 if 2014 is the base year. Suppose that in 2015, a typical U.S. student attending a state-supported college bought 10 textbooks at a price of $100 per book and enrolled in 25 credit hours of coursework at a price of $360 per credit hour. In 2016, the typical student continued to purchase 10 textbooks and enroll in 25 credit hours, but the price of a textbook rose to $110 per book and the tuition price increased to $400 per credit hour. The base year for computing a “student price index” using this information is 2015. What is the value of the student price index in 2015? In 2016? Show your work. What is the difference between gross private domestic investment and net private domestic investment? If you were to determine net domestic product (NDP) through the expenditures approach, which of these two…arrow_forwardYou 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 2017arrow_forwardEconomists use labor-market data to evaluate how well an economy is using its most valuable resource— its people. Two closely watched statistics are the unemployment rate and the employment–population ratio (calculated as the percentage of the adult population that is employed). Explain what happens to each of these in the following scenarios. In your opinion, which statistic is the more meaningful gauge of how well the economy is doing? Situations unemployment rate employment–population ratio More meaningful one a. An auto company goes bankrupt and lays off its workers, who immediately start looking for new jobs b. After an unsuccessful search, some of the laid-off workers quit looking for new jobs. c. Numerous students graduate from college but cannot find work. d. Numerous students graduate from college and immediately begin new jobs. e. A stock market boom induces newly enriched 60-year-old workers to take early retirement.…arrow_forward
- Enlighten at least two reasons of the CPI as an imperfect measure of the cost of living.arrow_forwardThe information on price and quantity of three products consumed by a typical household in the year 2020 and 2021 is given by the table below 2020 2021 Price Quantity Quantity 10 Price $5.50 Fish 12 $5 $10 Beef 5 $11 4 Train Ride $8 20 $9 22 Using 2020 as the base year, measure the CPI for 2021 and the inflation rate in 2021. Does this inflation rate correctly measure the cost of living changes for households in 2021? Explain. "The transfer payment does not have any effect on the gross domestic product of an economy". Discuss the validity of this statement.arrow_forwardSuppose that Apple Inc. manufactures a new generation of iPhones that can ascertain whether your interlocutor is lying. Assuming that the price of this good will be higher than that of the currently marketed iPhone, comment on the CPI’s capability to correctly measure the corresponding change in the cost of living.arrow_forward
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