Consider that the base period is year 2008. Get for this economy: A. The Consumer Price Index (CPI) in 2008 and 2009. B.
INTRODUCTION TO ECONOMICS BACHELOR IN BUSINESS ADMINISTRATION COURSE 2013/14 PRACTICE SHEET 8: 1. Suppose your wage rose by 7% over the last year. In each of the following cases, determine whether you are better or worse off in comparison to the previous year. Give some arguments. A. The yearly inflation rate was 10%. B. The yearly inflation rate was 4%. C. The economy experienced deflation, so that prices fell 3% last year. 2. Imagine an economy where only two consumer goods are produced, movies and popcorn, and a capital good, cameras. The table below shows the amount of those goods produced and sold and their prices.
Movies
Price (Pm)
Popcorn
Price (Pp)
Cameras
Price (Pc)
2008
100
40$
1,000
1.2$
80
5,000$
2009
105
42$
1,500
1.3$
90
6,000$
Consider that the base period is year 2008. Get for this economy: A. The Consumer Price Index (CPI) in 2008 and 2009. B. The deflator of the consumption in 2008 and 2009. C. The inflation of consumer goods in 2009, measured with: a. the deflator of the consumption. b. The CPI. Do you get the same results? If you do not, explain why.
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3. In a college, the average student purchases three English, two math and four economics textbooks. The prices in dollars of these books are given in the accompanying table.
2007
2008
2009
English textbook
57
62
64
Math textbook
80
82
84
Economics textbook
85
95
105
A. Create the price index for these books for all years with base year of 2007. B. What is the percent change in the price of an English textbook from 2007 to 2009? C. What is the percent change in the price of an Economics textbook from 2008 to 2009? D. What is the percent change in the market index from 2007 to 2009? 4. Each month the Bureau of Labor Statistics releases the CPI Summary for the previous month. Go to www.bls.gov and find the latest report (on the BLS home page, under “Latest Numbers” click on “Consumer Price Index: New Release”, and then choose “Consumer Price Index Summary”). A. How did the (seasonally adjusted) “all item” CPI change from the previous month? How does it compare to the same month one year ago? B. Compare the evolution for the last 7 months of the “all item” and the “all item less food and energy” CPI. Which is, in your opinion, more stable? Could you explain why?
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5. The following plot depicts the evolution of the inflation rate. Accordingly, draw the corresponding CPI series, taking as period base year 1.
