Three goods are consumed in an economy during years 1 and 2. The table shows prices (P1 and P2) for each good, and it shows the market basket that is used to calculate the consumer price index. The base year is year 1.
Good
P1
P2
Basket
Milk
(gallons)
$4
$4.20
4
Chicken
(pounds)
$5
$5.50
10
Onions
(bags)
$2
$2.32
1
Enter numbers in each blank, rounded to two decimal places as necessary. The cost of the basket in year 1 is $____ and the cost of the basket in year 2 is $_____. The value of the CPI in year 1 is _____ and the value of the CPI in year 2 is ______. The inflation rate is equal to ______%.
Three goods are consumed in an economy during years 1 and 2. The table shows prices (P1 and P2) for each good, and it shows the market basket that is used to calculate the consumer price index. The base year is year 1.
|
Good |
P1 |
P2 |
Basket |
|
Milk (gallons) |
$4 |
$4.20 |
4 |
|
Chicken (pounds) |
$5 |
$5.50 |
10 |
|
Onions (bags) |
$2 |
$2.32 |
1 |
Enter numbers in each blank, rounded to two decimal places as necessary. The cost of the basket in year 1 is $____ and the cost of the basket in year 2 is $_____. The value of the CPI in year 1 is _____ and the value of the CPI in year 2 is ______. The inflation rate is equal to ______%.
Related textbook solutions
Related questions
The monthly market basket for consumers consists of pizza, t-shirts, and rent.
The table below shows market basket quantities and prices for the base year (Year 1) and in the following year.
|
Product |
Base Year (Year 1) Quantity |
Price in the Base Year |
Price in Year 2 |
|
Pizza |
10 |
$3.00 |
$3.75 |
|
T-Shirts |
4 |
$10.00 |
$9.00 |
|
Rent |
1 |
$450.00 |
$495.00 |
In Year 1, the CPI for the economy is _____?
(Round
both answers to one decimal
place.)
In Year 2, the CPI for this economy is ______?
You are given the following table of prices:
|
Item |
Price in 2013 |
Price in 2014 |
|
1 Loaf of Bread |
$ 1.00 |
$ 1.50 |
|
1 Pound of Chicken |
$ 6.25 |
$ 7.00 |
|
1 Gallon of Milk |
$ 2.00 |
$ 3.00 |
|
1 Gallon of Gasoline |
$ 3.00 |
$ 2.80 |
|
1 year of cable (TV and Internet) |
$ 840.00 |
$ 960.00 |
|
1 Pair of Jeans |
$ 50.00 |
$ 60.00 |
|
1 year of Rent for Apartment |
$ 8,400.00 |
$ 9,000.00 |
To represent the purchases of the average consumer throughout the year, the government uses the following market basket:
52 loaves of bread, 30 pounds of chicken, 35 gallons of milk, 416 gallons of gasoline, 1 year of cable, 12 pairs of jeans, 1 year of rent for an apartment.
a.Calculate the cost of the market basket in 2013 and the cost of the market basket in 2014.
b.Using 2013 as the base year, calculate the CPI for 2013 and 2014.
c.Calculate the CPI inflation rate between 2013 and 2014.
d.Now suppose the nominal wage of an individual for 2013 and 2014 is given as follows:
|
Year |
Nominal Wage |
|
2013 |
$ 56.00 |
|
2014 |
$ 60.00 |
(i)What is the percentage change in the nominal wage between 2013 and 2014?
(ii)Calculate the real wage for both years in 2013 dollars (i.e. using 2013 as the base year).
(iii)What is the percentage change in the real wage between 2013 and 2014?
(iv)Has the purchasing power of the worker increased or decreased between 2013 and 2014? Explain how you know this (using a previous calculation from above).
