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Economics 12th Edition by William Baumol, Alan S Blinder
Edition 12ISBN: 978-0538453691Economics 12th Edition by William Baumol, Alan S Blinder
Edition 12ISBN: 978-0538453691 Exercise 10
The example in the appendix showed that the Student Price Index (SPI) rose by 42 percent from 1983 to 2009. You can understand the meaning of this better if you do the following:
a. Use Table 5 to compute the fraction of total spending accounted for by each of the three items in 1983. Call these values the "expenditure weights."
b. Compute the weighted average of the percentage increases of the three prices shown in Table 6, using the expenditure weights you just computed. You should get 42 percent as your answer. This shows that inflation, as measured by the SPI, is a weighted average of the percentage price increases of all the items that are included in the index.
a. Use Table 5 to compute the fraction of total spending accounted for by each of the three items in 1983. Call these values the "expenditure weights."
b. Compute the weighted average of the percentage increases of the three prices shown in Table 6, using the expenditure weights you just computed. You should get 42 percent as your answer. This shows that inflation, as measured by the SPI, is a weighted average of the percentage price increases of all the items that are included in the index.
Explanation
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a. Spending at a disaggregate level
The...
Economics 12th Edition by William Baumol, Alan S Blinder
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