$2500 $3500 S6500 $7500 $7800 $7825 $8UUU $81UU $8323-55UU350UU )55D3y125 The ne
ID: 1141934 • Letter: #
Question
$2500 $3500 S6500 $7500 $7800 $7825 $8UUU $81UU $8323-55UU350UU )55D3y125 The next 3 questions refer to problem 1 in Chapter 6 (7th edition) or Chapter 5 (6h/5th eds) 16. What is the CPI in the second year (assuming the base year CPI is 100)? 5.3 7.4 100.0 101.1 102.0 103.3 104.7 105.3 107.4 1084 109.7 110.8 111.1 112.2 17. 0% What is the rate of inflation between the base year and the subsequent year? 0.5% 0.7% 1.1% 2.0% 3.3% 4.7% 5.3% 7.4% 8.4% 9.7% 10.8% 11.1% 12.2% 18. In part b., is the family better off or worse off in terms of purchasing power? Better off Worse off The same Can't Tell . PROBLEMS . 1. Government survey takers determine that typical family expenditures each month in the year designated as the base year are as follows: 20 pizzas at $10 each Rent of apartment, $600 per month Gasoline and car maintenance, $100 Phone service (basic service plus 10 long-distance calls), $50 In the year following the base year, the survey takers determine that pizzas have risen to $11 each, apartment rent is S640, gasoline and maintenance have risen to $120, and phone service has dropped in price to $40. (LO1 a. Find the CPI in the subsequent year and the rate of inflation between the base year and the subsequent year. s nominal income rose by 5 percent between the base year and off or better off in terms of what their b. The family' the subsequent year. Are they worse income is able to buy?Explanation / Answer
(16)
Cost of basket in base year ($) = 20 x 10 + 600 + 100 + 50 = 200 + 750 = 950
Cost of basket in year 1 ($) = 20 x 11 + 640 + 120 + 40 = 220 + 800 = 1020
CPI in year 1 = (Cost of basket in year 1 / Cost of basket in base year) x 100= ($1020/$950) x 100
= 107.4
(17)
Inflation rate = % Change in CPI = (107.4 / 100**) - 1 = 1.074 - 1 = 0.074 = 7.4%
**Since base year CPI is 100
(18) The family is worse off (since inflation rate is positive).
NOTE: As per Answering Policy, 1st 3 questions have been answered.
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.