Question 1

Scenario 24-2
​
Suppose the residents of Mediaville spend all of their income on books, CDs, and DVDs. In 2009, they buy 400 books for $3,200, 200 CDs for $1,400, and 100 DVDs for $900. In 2010, they buy 360 books for $3,240, 250 CDs for $1,500, and 125 DVDs for $1,250. Assume that the market basket for the CPI is defined in the base year.
-Refer to Scenario 24-2. What are the prices of books, CDs, and DVDs in 2009?

Accepted Answer

The answer of Scenario 24-2
​
Suppose the residents of Mediaville spend...

Question 2

Suppose that the CPI in 1990 was 150, that the inflation rate in 1991 was 6%, and that the inflation rate in 1992 was 4%. What was the CPI in 1991 and 1992?

Accepted Answer

The answer of Suppose that the CPI in 1990 was...

Question 3

Scenario 24-3
A small economy produced and consumed goods X and Y in 2010 and 2011 in the amounts shown in the table below. Assume that the market basket for the CPI is defined in the base year.
 
-Refer to Scenario 24-3. Using 2010 as the base year, what is the inflation rate in 2011?

Accepted Answer

The answer of Scenario 24-3
A small economy produced and consumed...

Question 4

The table below lists the prices of chips and salsa for the months of October, November, and December. Assume that the typical consumer buys 8 bags of chips and 4 jars of salsa each month, and that October is the base period.
$\begin{array} { | l | l | l | } 
\hline \text { Month } & \text { Price of Chips } & \text { Price of Salsa } \
\hline \text { October } & \$ 2.50 & \$ 2.50 \
\hline \text { November } & \$ 2.40 & \$ 2.55 \
\hline \text { December } & \$ 2.60 & \$ 2.75 \
\hline
\end{array}$
-Refer to Table 24-6. Calculate the cost of a basket of goods for each month.

Accepted Answer

The answer of The table below lists the prices of...

Question 5

Suppose that the CPI in 2009 is 220 and that the inflation rate is 5% in 2010. What is the CPI in 2010?

Accepted Answer

The answer of Suppose that the CPI in 2009 is...

Question 6

Scenario 24-2
​
Suppose the residents of Mediaville spend all of their income on books, CDs, and DVDs. In 2009, they buy 400 books for $3,200, 200 CDs for $1,400, and 100 DVDs for $900. In 2010, they buy 360 books for $3,240, 250 CDs for $1,500, and 125 DVDs for $1,250. Assume that the market basket for the CPI is defined in the base year.
-Refer to Scenario 24-2. Using 2009 as the base year, what is the inflation rate in 2010?

Accepted Answer

The answer of Scenario 24-2
​
Suppose the residents of Mediaville spend...

Question 7

Scenario 24-3
A small economy produced and consumed goods X and Y in 2010 and 2011 in the amounts shown in the table below. Assume that the market basket for the CPI is defined in the base year.
 
-Refer to Scenario 24-3. Using 2011 as the base year, what is the CPI in each year?

Accepted Answer

The answer of Scenario 24-3
A small economy produced and consumed...

Question 8

Scenario 24-3
A small economy produced and consumed goods X and Y in 2010 and 2011 in the amounts shown in the table below. Assume that the market basket for the CPI is defined in the base year.
 
-Refer to Scenario 24-3. Using 2011 as the base year, what is the inflation rate in 2011?

Accepted Answer

The answer of Scenario 24-3
A small economy produced and consumed...

Question 9

Scenario 24-3
A small economy produced and consumed goods X and Y in 2010 and 2011 in the amounts shown in the table below. Assume that the market basket for the CPI is defined in the base year.
 
-Refer to Scenario 24-3. Using 2010 as the base year, what is the CPI in each year?

Accepted Answer

The answer of Scenario 24-3
A small economy produced and consumed...

Question 10

One advantage of using the CPI over the GDP Deflator is that the CPI updates the basket of goods used to compute the index each month whereas the GDP Deflator maintains the same basket of goods for long periods of time.​

Accepted Answer

The CPI does not update its basket of goods each month; it is updated less frequently, typically every few years, to reflect changes in consumer buying habits. The GDP Deflator, on the other hand, automatically adjusts as it reflects the prices of all goods and services produced domestically, changing with the composition of GDP.

Question 11

If the CPI was 170 in 1998 and was 187 in 1999, what was the inflation rate in 1999?

Accepted Answer

The answer of If the CPI was 170 in 1998...

Question 12

Scenario 24-2
​
Suppose the residents of Mediaville spend all of their income on books, CDs, and DVDs. In 2009, they buy 400 books for $3,200, 200 CDs for $1,400, and 100 DVDs for $900. In 2010, they buy 360 books for $3,240, 250 CDs for $1,500, and 125 DVDs for $1,250. Assume that the market basket for the CPI is defined in the base year.
-Refer to Scenario 24-2. Using 2010 as the base year, what is the CPI in each year?

Accepted Answer

The answer of Scenario 24-2
​
Suppose the residents of Mediaville spend...

Question 13

Suppose the CPI in 1950 was 24.1 and the CPI in 1975 was 53.8.​ When Ken's income rose from $10,000 per year in 1950 to $20,000 per year in 1970, Ken's standard of living improved between 1950 and 1970.

Accepted Answer

Ken's income doubled, but the CPI more than doubled, indicating that the cost of living increased faster than his income, reducing his purchasing power and standard of living.

Question 14

List the five steps for calculating the consumer price index and inflation rate.

Accepted Answer

The answer of List the five steps for calculating the...

Question 15

Scenario 24-2
​
Suppose the residents of Mediaville spend all of their income on books, CDs, and DVDs. In 2009, they buy 400 books for $3,200, 200 CDs for $1,400, and 100 DVDs for $900. In 2010, they buy 360 books for $3,240, 250 CDs for $1,500, and 125 DVDs for $1,250. Assume that the market basket for the CPI is defined in the base year.
-Refer to Scenario 24-2. What are the prices of books, CDs, and DVDs in 2010?

Accepted Answer

The answer of Scenario 24-2
​
Suppose the residents of Mediaville spend...

Question 16

Write the formula for finding the rate of inflation in 2011 if you have only the CPI for the years 2010, 2011, and 2012.

Accepted Answer

The answer of Write the formula for finding the rate...

Question 17

Write the formula for computing the cost of a basket of goods in a given period assuming you only have two goods, X and Y, which are bought in quantities Qx and Qy, and sold at prices of Px and Py.

Accepted Answer

The answer of Write the formula for computing the cost...

Question 18

During periods of deflation, the real interest rate will be lower than the nominal interest rate.​

Accepted Answer

During periods of deflation, the real interest rate is higher than the nominal interest rate because deflation increases the purchasing power of money over time, effectively increasing the real return on investments compared to the nominal rate.

Question 19

Scenario 24-2
​
Suppose the residents of Mediaville spend all of their income on books, CDs, and DVDs. In 2009, they buy 400 books for $3,200, 200 CDs for $1,400, and 100 DVDs for $900. In 2010, they buy 360 books for $3,240, 250 CDs for $1,500, and 125 DVDs for $1,250. Assume that the market basket for the CPI is defined in the base year.
-Refer to Scenario 24-2. Using 2010 as the base year, what is the inflation rate in 2010?

Accepted Answer

The answer of Scenario 24-2
​
Suppose the residents of Mediaville spend...

Question 20

Scenario 24-2
​
Suppose the residents of Mediaville spend all of their income on books, CDs, and DVDs. In 2009, they buy 400 books for $3,200, 200 CDs for $1,400, and 100 DVDs for $900. In 2010, they buy 360 books for $3,240, 250 CDs for $1,500, and 125 DVDs for $1,250. Assume that the market basket for the CPI is defined in the base year.
-Refer to Scenario 24-2. Using 2009 as the base year, what is the CPI in each year?

Accepted Answer

The answer of Scenario 24-2
​
Suppose the residents of Mediaville spend...

Quiz 24: Measuring the Cost of Living

Suppose that the CPI in 1990 was 150, that the inflation rate in 1991 was 6%, and that the inflation rate in 1992 was 4%. What was the CPI in 1991 and 1992?

Scenario 24-3 A small economy produced and consumed goods X and Y in 2010 and 2011 in the amounts shown in the table below. Assume that the market basket for the CPI is defined in the base year. -Refer to Scenario 24-3. Using 2010 as the base year, what is the inflation rate in 2011?

Suppose that the CPI in 2009 is 220 and that the inflation rate is 5% in 2010. What is the CPI in 2010?

Scenario 24-3 A small economy produced and consumed goods X and Y in 2010 and 2011 in the amounts shown in the table below. Assume that the market basket for the CPI is defined in the base year. -Refer to Scenario 24-3. Using 2011 as the base year, what is the CPI in each year?

Scenario 24-3 A small economy produced and consumed goods X and Y in 2010 and 2011 in the amounts shown in the table below. Assume that the market basket for the CPI is defined in the base year. -Refer to Scenario 24-3. Using 2011 as the base year, what is the inflation rate in 2011?

Scenario 24-3 A small economy produced and consumed goods X and Y in 2010 and 2011 in the amounts shown in the table below. Assume that the market basket for the CPI is defined in the base year. -Refer to Scenario 24-3. Using 2010 as the base year, what is the CPI in each year?

One advantage of using the CPI over the GDP Deflator is that the CPI updates the basket of goods used to compute the index each month whereas the GDP Deflator maintains the same basket of goods for long periods of time.

If the CPI was 170 in 1998 and was 187 in 1999, what was the inflation rate in 1999?

Suppose the CPI in 1950 was 24.1 and the CPI in 1975 was 53.8. When Ken's income rose from $10,000 per year in 1950 to $20,000 per year in 1970, Ken's standard of living improved between 1950 and 1970.

List the five steps for calculating the consumer price index and inflation rate.

Write the formula for finding the rate of inflation in 2011 if you have only the CPI for the years 2010, 2011, and 2012.

Write the formula for computing the cost of a basket of goods in a given period assuming you only have two goods, X and Y, which are bought in quantities Qx and Qy, and sold at prices of Px and Py.

During periods of deflation, the real interest rate will be lower than the nominal interest rate.

Quiz 24: Measuring the Cost of Living

Suppose that the CPI in 1990 was 150, that the inflation rate in 1991 was 6%, and that the inflation rate in 1992 was 4%. What was the CPI in 1991 and 1992?

Scenario 24-3 A small economy produced and consumed goods X and Y in 2010 and 2011 in the amounts shown in the table below. Assume that the market basket for the CPI is defined in the base year. -Refer to Scenario 24-3. Using 2010 as the base year, what is the inflation rate in 2011?

Suppose that the CPI in 2009 is 220 and that the inflation rate is 5% in 2010. What is the CPI in 2010?

Scenario 24-3 A small economy produced and consumed goods X and Y in 2010 and 2011 in the amounts shown in the table below. Assume that the market basket for the CPI is defined in the base year. -Refer to Scenario 24-3. Using 2011 as the base year, what is the CPI in each year?

Scenario 24-3 A small economy produced and consumed goods X and Y in 2010 and 2011 in the amounts shown in the table below. Assume that the market basket for the CPI is defined in the base year. -Refer to Scenario 24-3. Using 2011 as the base year, what is the inflation rate in 2011?

Scenario 24-3 A small economy produced and consumed goods X and Y in 2010 and 2011 in the amounts shown in the table below. Assume that the market basket for the CPI is defined in the base year. -Refer to Scenario 24-3. Using 2010 as the base year, what is the CPI in each year?

One advantage of using the CPI over the GDP Deflator is that the CPI updates the basket of goods used to compute the index each month whereas the GDP Deflator maintains the same basket of goods for long periods of time.​

If the CPI was 170 in 1998 and was 187 in 1999, what was the inflation rate in 1999?

Suppose the CPI in 1950 was 24.1 and the CPI in 1975 was 53.8.​ When Ken's income rose from $10,000 per year in 1950 to $20,000 per year in 1970, Ken's standard of living improved between 1950 and 1970.

List the five steps for calculating the consumer price index and inflation rate.

Write the formula for finding the rate of inflation in 2011 if you have only the CPI for the years 2010, 2011, and 2012.

Write the formula for computing the cost of a basket of goods in a given period assuming you only have two goods, X and Y, which are bought in quantities Qx and Qy, and sold at prices of Px and Py.

During periods of deflation, the real interest rate will be lower than the nominal interest rate.​

One advantage of using the CPI over the GDP Deflator is that the CPI updates the basket of goods used to compute the index each month whereas the GDP Deflator maintains the same basket of goods for long periods of time.

Suppose the CPI in 1950 was 24.1 and the CPI in 1975 was 53.8. When Ken's income rose from $10,000 per year in 1950 to $20,000 per year in 1970, Ken's standard of living improved between 1950 and 1970.

During periods of deflation, the real interest rate will be lower than the nominal interest rate.