1.Why is it important to have two measures of the Consumer Price Index, specifically, the Core...

1.Why is it important to have two measures of the Consumer Price Index, specifically, the Core CPI versus the CPI? Discuss.

2.How successful was the Federal Reserve at lowering the inflation rate during the 1980s? Discuss.

Expert Solution

Rahul Sunny answered 2 years ago

(From The Consumer Price Indexes Web site) The Consumer Price Index (CPI) measures the average change...

(From The Consumer Price Indexes Web site) The Consumer Price Index (CPI) measures the average change over time in the prices paid by urban consumers for consumer goods and services. The CPI affects nearly all Americans because of the many ways it is used. One of its biggest uses is as a measure of inflation. By providing information about price changes in the Nation’s economy to government, business, and labor, the CPI helps them to make economic decisions. The President,...

We discussed two price indexes, the Consumer Price Index (CPI) being an example of an index...

We discussed two price indexes, the Consumer Price Index (CPI) being an example of an index that has fixed quantity weights from the base period and the GDP Deflator being an example of an index that has current quantity weights. Suppose we have an economy in which there are only three goods produced and consumed: rice, electricity, and cellphones. The prices and quantities for the years 2018 and 2019 are given in the following table: 2018 Rice Electricity Cellphones Quantity...

1. If the Consumer Price Index is 125, then prices have a. risen 25 percent in...

1. If the Consumer Price Index is 125, then prices have a. risen 25 percent in the last year. b. risen 25 percent since the base year. c. declined 75 percent since the base year. 2. In the economy of Talikastan in 2015, consumption was $5300, GDP was $8800, government purchases were $1800, imports were $600, and investment was $2000. What were Talikastan’s exports in 2015? (Hint: Use the formula: GDP = C + I + G + X -...

1.State the distinction between the consumer price index (CPI) and the GDP price index

The consumer price index is calculated by?

The Consumer Price Index (CPI) is one of the most important economic variables that we look...

The Consumer Price Index (CPI) is one of the most important economic variables that we look at. Why is it so important? In what ways does it impact economic activity and the choices policymakers face? Discuss some shortcomings or issues with the way we calculate CPI. What suggestions do you have for addressing these?

The consumer price index (CPI) is a fixed-weight index. It compares the price of a fixed...

The consumer price index (CPI) is a fixed-weight index. It compares the price of a fixed bundle of goods in one year with the price of the same bundle of goods in some base year. Suppose the market basket to compute the consumer price index consists of 200 units of good X, 175 units of good Y, and 60 units of good Z. Year 2013 is the base year. Prices of these goods for the years 2013, 2014, and 2015...

Suppose the Consumer Price Index (CPI) is computed as a Laspeyres price index. Explain the concept...

Suppose the Consumer Price Index (CPI) is computed as a Laspeyres price index. Explain the concept of “substitution bias” in using the CPI to measure the change in the cost of living. Be sure to explain what is meant by the “change in the cost of living.”

1. The consumer price index is a cost-of-living index. False True 2.Labor productivity is a major...

1. The consumer price index is a cost-of-living index. False True 2.Labor productivity is a major determinant of the money supply. the skill level of the labor force. the size of the labor force. living standards. 3.If consumption falls from $600 billion to $575 billion and the marginal propensity to consume is 0.8, then equilibrium income will fall by $25 billion. rise by $25 billion. rise by $125 billion. fall by $125 billion.

1. Explain briefly what the consumer price index is trying to measure and how it is...

1. Explain briefly what the consumer price index is trying to measure and how it is constructed.

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