Please show how you got the answer. Thank you! 1) Assume there is a simple econo
ID: 1192142 • Letter: P
Question
Please show how you got the answer. Thank you!
1) Assume there is a simple economy where people consume only 2 goods, food and clothing. Further assume that the market basket of goods used to compute the CPI consists of 100 units of food and 20 units of clothing.
Food
Clothing
2004 price per unit
$8
$20
2005 price per unit
$12
$40
Compute the percentage changes in the price of food and the percentage change in the price of clothing between 2004 and 2005.
Calculate the percentage change in the CPI between 2004 and 2005.
Do you think the CPI price changes affect all consumers in the economy to the same extent? Explain.
2) Calculate how much each of the following items is worth in terms of today's dollars using 180 as the price index for today.
a. In 1925, the CPI was 18 and the price of a movie ticket was $0.30.
b. In 1930, the CPI was 14 and a cook earned $20 a week.
c. In 1940, the CPI was 16 and a gallon of gas cost $0.20.
3) The table below uses data for 3 hypothetical countries. All the number values are in thousands. Complete the blank entries in the table below.
Country
Adult
Population
Labor
Force
Employed
Unemployed
Unemployment
Rate
Labor-Force
Participation
Rate
A
120,000
60,000
4,500
B
28,000
3,000
60
C
70,000
40,000
10
4) The following table indicates U.S. real GDP data. Calculate real GDP per person for 1987 and 2005. Then use real GDP per capita to compute the percentage change in real GDP per person from 1987 to 2005.
Year
Real GDP (2000 prices)
(in million)
Population
(in million)
1987
$6,435,000
243
2005
$11,092,000
296.6
Food
Clothing
2004 price per unit
$8
$20
2005 price per unit
$12
$40
Explanation / Answer
ans 1)
% change in price of food = (new price- old price)*100/ old price =(12-8)100/8 = 50%
% change in price of cloth = (new price- old price)*100/ old price = (40-20)100/20 =100%
% in CPI = (CPI of food * no of units of food +CPI of cloth * no of units of cloth)/total units of good used
=[(12*100/8)*100 + (40*100/20)*20 ]/120= 158.333
yes increase in CPI affects all customers to some extent.
ans.2
a)CPI2/ CPI1 = PRICE2/PRICE1
180/18 = PRICE2/ 0.30
PRICE2= $3
B) SIMILARLY
EARNING OF COOK NOW= (180/14)*20= 257.142 $
C) GAS COST NOW= (180/16)*.20 =2.25 $
ANS 3.
Country
Adult
Population
Labor
Force
Employed
Unemployed
Unemployment
Rate
Labor-Force
Participation
Rate
A
120,000
64500
60,000
4,500
6.97
53.75
B
46,667
28,000
25000
3,000
10.71
60
C
70,000
40,000
36000
4000
10
57.1
UNEMPLOYMENT RATE = % OF TOTAL LABOR FORCE WHO ARE UNEMPLOYED
=( UNEMPLOYED/ TOTAL LABOR FORCE)*100
LABOR FORCE= EMPLOYED+ UNEMPLOYED
LABOUR FORCE PARTICIPATION RATE= (LABOR FORCE/ POPULATION)*100
USING THESE FORMULAS , I HAVE FILLED ALL BLANKS
ANS 4
NOTE:
GDP PER CAPITA= REAL GDP/ POPULATION
% CHANGE IN GDP PER CAPITA = (PCI2005- PCI1987)*100 /PCI1987
WHERE PCI IS PER CAPITA INCOME OR GDP PER CAPITA
% CHANGE IN GDP PER CAPITA =(37397.1679-26481.48148)*100/26481.48148= 41.22%
Country
Adult
Population
Labor
Force
Employed
Unemployed
Unemployment
Rate
Labor-Force
Participation
Rate
A
120,000
64500
60,000
4,500
6.97
53.75
B
46,667
28,000
25000
3,000
10.71
60
C
70,000
40,000
36000
4000
10
57.1
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