4. Consider the following price data for a set of goods. 2006 2007 1.30 1.25 21.15...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
4. Consider the following price data for a set of goods. 2006 2007 1.30 1.25 21.15 32.20 97.00 96.80 80.68 70.45 Food Toys 1.20 10.20 Transportation 95.00 100.20 2005 Phone 2008 1.50 35.50 97.52 60.54 a. Economists think the appropriate market basket is: 100 units of food, 10 toys, 1 transportation, and 1 phone. Compute the price of the market basket in each year. b. Using 2005 as the base year, compute the price index for this market basket for each year. c. Find the inflation rate for each year after 2005. d. Now, suppose a different economist thinks that it is ridiculous to include toys in the market basket, and believes that most households have at least 2 phones. This economist uses the basket: 100 units of food, 1 transportation, and 2 phones. Compute the price of the market basket in each year. e. Using 2005 as the base year, compute the price index for this new market basket for each year. f. Find the inflation rate for each year after 2005 using this new basket. Why are the inflation rates so different when using this new basket? g. Imagine that you indeed really like toys (so you use the market basket from (a)). Your nominal wage in 2006 is $22 per hour. You get a raise to $27 in 2007. Which wage offers more purchasing power in its respective year? h. Using the same basket as in (g), what would your wage need to be in 2007 in order to have the same purchasing power as your $22 wage in 2006? 4. Consider the following price data for a set of goods. 2006 2007 1.30 1.25 21.15 32.20 97.00 96.80 80.68 70.45 Food Toys 1.20 10.20 Transportation 95.00 100.20 2005 Phone 2008 1.50 35.50 97.52 60.54 a. Economists think the appropriate market basket is: 100 units of food, 10 toys, 1 transportation, and 1 phone. Compute the price of the market basket in each year. b. Using 2005 as the base year, compute the price index for this market basket for each year. c. Find the inflation rate for each year after 2005. d. Now, suppose a different economist thinks that it is ridiculous to include toys in the market basket, and believes that most households have at least 2 phones. This economist uses the basket: 100 units of food, 1 transportation, and 2 phones. Compute the price of the market basket in each year. e. Using 2005 as the base year, compute the price index for this new market basket for each year. f. Find the inflation rate for each year after 2005 using this new basket. Why are the inflation rates so different when using this new basket? g. Imagine that you indeed really like toys (so you use the market basket from (a)). Your nominal wage in 2006 is $22 per hour. You get a raise to $27 in 2007. Which wage offers more purchasing power in its respective year? h. Using the same basket as in (g), what would your wage need to be in 2007 in order to have the same purchasing power as your $22 wage in 2006?
Expert Answer:
Answer rating: 100% (QA)
a The price of the market basket in each year is 2005 Food 120 120 units Toys 1020 102 units Transportation 9500 950 units Phone 10020 1002 units 2006 Food 130 130 units Toys 2115 211 units Transporta... View the full answer
Related Book For
Auditing a risk based approach to conducting a quality audit
ISBN: 978-1133939153
9th edition
Authors: Karla Johnstone, Audrey Gramling, Larry Rittenberg
Posted Date:
Students also viewed these economics questions
-
re Regular Languages and Finite Automata (a) Let L be the set of all strings over the alphabet {a, b} that end in a and do not contain the substring bb. Describe a deterministic finite automaton...
-
The following additional information is available for the Dr. Ivan and Irene Incisor family from Chapters 1-5. Ivan's grandfather died and left a portfolio of municipal bonds. In 2012, they pay Ivan...
-
Kindly solve both the question. Thanks in advance.Question 1Question 2 Below are the transactions for Baste SewIng Shop for March, the first month of operations. March 1 Issue common stock in...
-
Breakin Away Company has three employees-a consultant, a computer programmer, and an administrator. The following payroll information is available for each employee: *For hourly employees, overtime...
-
Markway Inc. is contemplating selling bonds. The issue is to be composed of 750 bonds, each with a face amount of $1,000. Required: 1. Calculate how much Markway is able to borrow if each bond is...
-
What is the daughter nucleus of the decay? The Curiosity rover sent to explore the surface of Mars has an electric generator powered by heat from the radioactive decay of \({ }^{238} \mathrm{Pu}\), a...
-
Using 360 days as the denominator, calculate interest for the following notes using the formula I = P R T. Principal Rate Time Interest 6.00% 7.50 $5,000 1,000 4,500 950 30 days 60 120 8.00 6.80...
-
Write a python on below requirenment 12.11 LAB: Parsing food data Given a text file containing the availability of food items, write a program that reads the information from the text file and...
-
General Electric Company reports the following footnote in its 10-K report. December 31 (in millions) 2012 2011 Raw materials and work in process $ 9,295 $ 8,735 Finished products 6,020 4,971...
-
Attached Drawing shows the Survey Plan for Proposed Construction and Completion of a construction project. Levels shown are the existing surface levels. The site is to be cleared within the...
-
Give an example of a primary anchor tenant and a secondary tenant at Chartway Arena at the Ted Constant Convocation Center: [1]Primary Anchor: [2]Secondary Tenant:
-
Provide business model canvas for a online travelcompany Skyscanner Business Model Canvas Key Partners Cost Structure Designed for: Skyscanner Designed by: Date: Key Activities Value Propositions...
-
This requires you to identify and clarify the impression you want to leave with the new hires about your culture and work environment. You must ensure your messaging is consistent throughout and that...
-
A retailer is planning storage for a bulk candy display using plastic containers measuring 13 inches by 8 inches by 4 inches. The candies for one particular bin measure (1)/(2) inch in diameter. How...
-
"That old equipment for producing carburetors is worn out," said Bill Seebach, president of Hondrich Company. "We need to make a decision quickly." The company is trying to decide whether it should...
-
Perform the indicated operations. In designing a cam for a fire engine pump, the expression is used. Simplify this expression. (3) (3 4 32
-
Most accounting systems have the ability to generate exception reports that immediately identify control procedure failures or transactions that are out of the norm so that management can determine...
-
Practice calculating the sample size and the number of expected errors in attributes sampling by using the tables in Exhibit and the following combinations ofinputs: Tolerable Rate of x Sample Size...
-
Does the auditor always need to engage another independent specialist to test the work of the specialist hired by the company to determine the value of the tangible and intangible assets other than...
-
An obstetrician wants to know whether the proportion of children born on each day of the week is the same. She randomly selects 500 birth records and obtains the data shown in Table 3 (based on data...
-
Which of the following approaches is used to study management? Art Process Science Profession
-
Management is Ongoing process Social process Integrated process All the above
Study smarter with the SolutionInn App