Question 1

Suppose the average price of gas in 2012 was $0.95 per litre and $0.97 in 2013.The inflation rate was 3 percent in 2013.What was the 2013 price of gas in 2012 dollars?

Accepted Answer

First, we need to find the inflation-adjusted price of gas in 2013. We can do this by multiplying the 2012 price by (1 + inflation rate):
0.95 x 1.03 = 0.9765 (rounded to 4 decimal places)
Next, we need to convert the 2013 price (in nominal dollars) to 2012 dollars. We can do this by dividing the 2013 price by the inflation factor:
0.97 / 1.03 = 0.9427 (rounded to 4 decimal places)
Therefore, the 2013 price of gas in 2012 dollars was $0.942.

Question 2

In 1969,Don bought a Dodge Dart for $2500.In 2012,he bought a Honda Civic for $22 000.If the price index in 1969 was 36.7 and the price index in 2012 was 190,what is the price of the Dodge Dart in 2012 prices?

Accepted Answer

To find the price of the Dodge Dart in 2012 prices, we need to adjust the original price of $2500 using the price indexes from 1969 and 2012.

First, we need to find the inflation factor between 1969 and 2012:

inflation factor = (price index in 2012 / price index in 1969) = 190 / 36.7 = 5.17

Next, we can use the inflation factor to adjust the original price:

Dodge Dart price in 2012 prices = $2500 x inflation factor = $2500 x 5.17 = $12,925

Therefore, the best choice is D, which is the closest to the calculated price of $12,925.

Question 3

In 1949,the city of Sherbrooke,Quebec,built a hospital for about $500 000.In 1987,the city restored its courthouse for about $2.4 million.A price index for nonresidential construction was 14 in 1949,92 in 1987,and 114.5 in 2012.According to these numbers,what approximately did the hospital cost?

Accepted Answer

The answer of In 1949,the city of Sherbrooke,Quebec,built a hospital...

Question 4

Scenario 6-1
Grant Smith was a doctor. In 1944, he made $12 000. His daughter, Lisa Smith, is also a doctor. Last year she made $175 000. The price index in 1944 was 17.6 and the price index last year was 192.
-Refer to the Scenario 6-1.What is Grant's 1944 income in last year's dollars?

Accepted Answer

To find Grant's 1944 income in last year's dollars, we need to use the formula:
(income in 1944 dollars) x (price index last year) / (price index in 1944)
= $12 000 x 192 / 17.6
= $130 909.09
Therefore, the best choice is D.

Question 5

Andrew is offered a job in Calgary where the CPI is 120 and a job in Toronto where the CPI is 150.Andrew's job offer in Calgary is for $65 000.Which of the following salaries would the Toronto job have to pay so that both jobs have the same purchasing power?

Accepted Answer

To have the same purchasing power, the salary in Toronto should be adjusted for the difference in CPI. The formula is: Salary in Toronto = Salary in Calgary * (CPI in Toronto / CPI in Calgary). So, $65,000 * (150/120) = $81,250.

Question 6

Ingrid takes a job in 1981 at a salary of $10 000.By 2012,she has been promoted,with a salary of $50 000.If the price index in 1981 is 50,and the price index in 2012 is 180,what is Ingrid's 2012 salary in 1981 dollars?

Accepted Answer

To find Ingrid's 2012 salary in 1981 dollars, we adjust for inflation using the price indices. The formula is: (2012 salary) * (1981 price index / 2012 price index) = 1981 equivalent salary. So, $50,000 * (50 / 180) = $13,889.

Question 7

You know that a chocolate bar costs 60 cents today.You also know the CPI for 1962 and the CPI for today.Which of the following would you use to compute the price of the candy bar in 1962 prices?

Accepted Answer

To compute the price of the candy bar in 1962 prices, we need to adjust for inflation. We do this by dividing the current price (60 cents) by the current CPI and then multiplying by the 1962 CPI. This will give us the price of the candy bar in 1962 dollars. Therefore, the formula would be 60 cents x (1962 CPI/today's CPI). Choice D is the only option that follows this logic.

Question 8

The 2012 CPI was 177 and the 1982 CPI was 96.5.How much would you need in 2012 in order to buy what you were able to buy with the $1000 in 1982?

Accepted Answer

To calculate the inflation rate from 1982 to 2012 we use the formula:
Inflation rate = (CPI in 2012 - CPI in 1982) / CPI in 1982 x 100%
= (177 - 96.5) / 96.5 x 100%
= 83.5%
This means that the cost of goods has increased by 83.5% from 1982 to 2012. To find out how much $1000 in 1982 is worth in 2012, we multiply $1000 by the inflation rate multiplier (1 + 83.5%) which equals 1.835. Therefore:
$1000 x 1.835 = $1835
Rounding to the nearest cent gives:
Answer: A) $1834.20

Question 9

In 1990,Professor Fellswoop made $12 000,in 2000 he earned $24 000,and in 2012 he earned $36 000.If the CPI was 40 in 1990,60 in 2000,and 100 in 2012,then in real terms,when was Professor Fellswoop's salary highest and lowest?

Accepted Answer

The answer of In 1990,Professor Fellswoop made $12 000,in 2000 he...

Question 10

Scenario 6-1
Grant Smith was a doctor. In 1944, he made $12 000. His daughter, Lisa Smith, is also a doctor. Last year she made $175 000. The price index in 1944 was 17.6 and the price index last year was 192.
-Refer to the Scenario 6-1.What is Lisa's income in 1944 dollars?

Accepted Answer

To find Lisa's income in 1944 dollars, adjust her income for inflation using the price indices: (175,000 / 192) * 17.6 = 16,042.

Question 11

Ethel purchased a bag of groceries in 1970 for $8.She purchased the same bag of groceries in 2012 for $25.If the price index was 38.8 in 1970 and 180 in 2012,what's the price of a 1970 bag of groceries in 2012 prices?

Accepted Answer

The answer of Ethel purchased a bag of groceries in...

Question 12

Tiffany is offered a job in Winnipeg that pays $90 000.She is offered a similar job in Montreal for $60 000.Which of the following sets of CPIs comes closest to giving both salaries the same purchasing power?

Accepted Answer

The answer of Tiffany is offered a job in Winnipeg...

Question 13

Leslie is offered a job in Vancouver that pays $50 000.She is also offered a job in Halifax that pays $60 000.Which of the following sets of CPIs comes closest to giving both salaries the same purchasing power?

Accepted Answer

The answer of Leslie is offered a job in Vancouver...

Question 14

Which of the following best defines "indexation"?

Accepted Answer

Indexation refers to the practice of adjusting a dollar amount, such as wages or pensions, for the effects of inflation using a law or contract. This ensures that the purchasing power of the dollar amount remains constant over time. Option A refers to the process of calculating the real interest rate, which takes into account inflation. Option C refers to the process of adjusting dollar values by using a price index. Option D refers to an adjustment made by Statistics Canada to the CPI to ensure that it is comparable to the GDP deflator.

Question 15

In 1972 in Kelowna,BC,one could buy model rocket engines for $1.50.If those same engines cost $3.00 today,which of the following sets of CPIs represents the same purchasing power for the cost in 1972 and the cost today?

Accepted Answer

To calculate for the equivalent purchasing power between 1972 and today, we need to use the CPI (Consumer Price Index) for both years. The formula is:

(cost of item today) x (CPI in year of purchase) = (cost of item in year of purchase) x (CPI today)

Let's use choice C as an example:

$3.00 (today's cost) x 60 (CPI in 1972) = $1.50 (1972's cost) x 120 (CPI today)

$180 = $180

This means that $1.50 in 1972 has the same purchasing power as $3.00 today with the CPIs of 60 and 120, respectively. Therefore, the answer is choice C.

Question 16

In 1964 in London,Ontario,one could buy a chili dog and a root beer for $1.25;today the same chili dog and root beer cost $3.75.Which of the following sets of CPIs represents the same purchasing power for the cost in 1964 and the cost today?

Accepted Answer

The ratio of the costs today to 1964 is 3.75/1.25 = 3. The CPI today should be 3 times the CPI in 1964, which is true for option D (270.0/90 = 3).

Question 17

When does a cost-of-living allowance (COLA)automatically raise the wage rate?

Accepted Answer

A cost-of-living allowance (COLA) is designed to protect an employee's purchasing power. It automatically adjusts an employee's wages based on changes in the consumer price index (CPI) which measures inflation. When the CPI increases, the COLA will raise the wage rate to compensate for the increase in the cost of living. Thus, the correct option is B, when the consumer price index increases.

Question 18

In 1972 in Sarnia,Ontario,one could buy a bag of chips,a pound of hamburger,a package of buns,and a small bag of charcoal for about $2.50.If the same goods today cost about $6.00,which of the following sets of CPIs represents the same purchasing power for the cost in 1972 and the cost today?

Accepted Answer

The answer of In 1972 in Sarnia,Ontario,one could buy a...

Question 19

You know that a chocolate bar cost five cents in 1962.You also know the CPI for 1962 and the CPI for today.Which of the following would you use to compute the price of the candy bar in today's prices?

Accepted Answer

To compute the price of the candy bar in today's prices, we need to adjust the original price for inflation using the CPI. The rule is: Original price x (Current CPI/Original CPI). Therefore, we can use choice C - 5 cents x (today's CPI/1962 CPI) - to compute the price of the candy bar in today's prices.

Question 20

Scenario 6-1
Grant Smith was a doctor. In 1944, he made $12 000. His daughter, Lisa Smith, is also a doctor. Last year she made $175 000. The price index in 1944 was 17.6 and the price index last year was 192.
-Refer to the Scenario 6-1.What was the ratio of Grant's real income to Lisa's real income?

Accepted Answer

Grant's real income = $12,000 / 17.6 = $681.82Lisa's real income = $175,000 / 192 = $911.46Ratio of Grant's real income to Lisa's real income = 681.82 / 911.46 = 7.5:10

Quiz 6: Measuring the Cost of Living

Suppose the average price of gas in 2012 was $0.95 per litre and $0.97 in 2013.The inflation rate was 3 percent in 2013.What was the 2013 price of gas in 2012 dollars?

In 1969,Don bought a Dodge Dart for $2500.In 2012,he bought a Honda Civic for $22 000.If the price index in 1969 was 36.7 and the price index in 2012 was 190,what is the price of the Dodge Dart in 2012 prices?

In 1949,the city of Sherbrooke,Quebec,built a hospital for about $500 000.In 1987,the city restored its courthouse for about $2.4 million.A price index for nonresidential construction was 14 in 1949,92 in 1987,and 114.5 in 2012.According to these numbers,what approximately did the hospital cost?

Scenario 6-1 Grant Smith was a doctor. In 1944, he made $12 000. His daughter, Lisa Smith, is also a doctor. Last year she made $175 000. The price index in 1944 was 17.6 and the price index last year was 192. -Refer to the Scenario 6-1.What is Grant's 1944 income in last year's dollars?

Andrew is offered a job in Calgary where the CPI is 120 and a job in Toronto where the CPI is 150.Andrew's job offer in Calgary is for $65 000.Which of the following salaries would the Toronto job have to pay so that both jobs have the same purchasing power?

Ingrid takes a job in 1981 at a salary of $10 000.By 2012,she has been promoted,with a salary of $50 000.If the price index in 1981 is 50,and the price index in 2012 is 180,what is Ingrid's 2012 salary in 1981 dollars?

You know that a chocolate bar costs 60 cents today.You also know the CPI for 1962 and the CPI for today.Which of the following would you use to compute the price of the candy bar in 1962 prices?

The 2012 CPI was 177 and the 1982 CPI was 96.5.How much would you need in 2012 in order to buy what you were able to buy with the $1000 in 1982?

In 1990,Professor Fellswoop made $12 000,in 2000 he earned $24 000,and in 2012 he earned $36 000.If the CPI was 40 in 1990,60 in 2000,and 100 in 2012,then in real terms,when was Professor Fellswoop's salary highest and lowest?

Scenario 6-1 Grant Smith was a doctor. In 1944, he made $12 000. His daughter, Lisa Smith, is also a doctor. Last year she made $175 000. The price index in 1944 was 17.6 and the price index last year was 192. -Refer to the Scenario 6-1.What is Lisa's income in 1944 dollars?

Ethel purchased a bag of groceries in 1970 for $8.She purchased the same bag of groceries in 2012 for $25.If the price index was 38.8 in 1970 and 180 in 2012,what's the price of a 1970 bag of groceries in 2012 prices?

Tiffany is offered a job in Winnipeg that pays $90 000.She is offered a similar job in Montreal for $60 000.Which of the following sets of CPIs comes closest to giving both salaries the same purchasing power?

Leslie is offered a job in Vancouver that pays $50 000.She is also offered a job in Halifax that pays $60 000.Which of the following sets of CPIs comes closest to giving both salaries the same purchasing power?

Which of the following best defines "indexation"?

In 1972 in Kelowna,BC,one could buy model rocket engines for $1.50.If those same engines cost $3.00 today,which of the following sets of CPIs represents the same purchasing power for the cost in 1972 and the cost today?

In 1964 in London,Ontario,one could buy a chili dog and a root beer for $1.25;today the same chili dog and root beer cost $3.75.Which of the following sets of CPIs represents the same purchasing power for the cost in 1964 and the cost today?

When does a cost-of-living allowance (COLA) automatically raise the wage rate?

In 1972 in Sarnia,Ontario,one could buy a bag of chips,a pound of hamburger,a package of buns,and a small bag of charcoal for about $2.50.If the same goods today cost about $6.00,which of the following sets of CPIs represents the same purchasing power for the cost in 1972 and the cost today?

You know that a chocolate bar cost five cents in 1962.You also know the CPI for 1962 and the CPI for today.Which of the following would you use to compute the price of the candy bar in today's prices?