In: Economics
Tables 1 and 2 show the
quantities of the goods that Suzie bought and the prices she paid
during two consecutive weeks. Suzie’s CPI market basket contains
the goods she bought in Week 1. Calculate the cost of Suzie’s CPI
market basket in Week 1 and in Week 2. What percentage of the CPI
market basket is gasoline? Calculate the value of Suzie’s CPI in
Week 2 and her inflation rate in Week 2.
Table 1 Data for Week 1
Item
Quantity
Price (per unit)
Coffee
11 cups
$3.25
DVDs
1
$25.00
Gasoline
15 gallons
$2.50
Table 2 Data for Week 2
Item
Quantity
Price (per unit)
Coffee
11 cups
$3.25
DVDs
3
$12.50
Gasoline
5 gallons
$3.00
Concert
1 ticket
$95.00
Use the following information to work Problems 4 and 5.
The GDP price index in the United States in 2000 was about 90, and real GDP in 2000 was $11 trillion (2005 dollars). The GDP price index in 2010 was about 111, and real GDP in 2010 was $13.1 trillion (2005 dollars).
Calculate nominal GDP in 2000 and in 2010 and the percentage increase in nominal GDP between 2000 and 2010.What was the percentage increase in production between 2000 and 2010, and by what percentage did the cost of living rise between 2000 and 2010?
Week 1 | Week 2 | ||||||||
Quantity | Price $ | Quantity | Price $ | market basket in Week 1 $ | market basket in Week 2 $ | ||||
Coffee | 11 | 3.25 | 11 | 3.25 | 35.75 | 35.75 | |||
DVD | 1 | 25.00 | 3 | 12.50 | 25 | 12.5 | |||
Gasoline (gallons) | 15 | 2.50 | 5 | 3.00 | 37.5 | 45 | |||
98.25 | 93.25 | ||||||||
Base year year 1 | |||||||||
Cost of the base year market basket in the base period | |||||||||
CPI market basket in Week 1= $98.25. | |||||||||
Base year price x base year quantity | |||||||||
CPI market basket in Week 2=$93.25. | |||||||||
Cost of the base year market basket in the current period | |||||||||
Percentage of gasoline to market basket is=(37.5/98.25)x100 (Week 1) | 38.17% | ||||||||
CPI formula | (Base year basket quantity times current year prices)/Base year basket quantities times base year prices)100 | ||||||||
CPI=( Cost of the base year market basket in the current period/Cost of the base year market basket in the base period)x100 | |||||||||
(93.25/98.25)x100 | |||||||||
CPI for week 2 is 94.91% | |||||||||
CPI for week 1 (base period) is 100 | |||||||||
Inflation rate between week 1 to week 2 | |||||||||
((Current period CPI-Prior period CPI)/Prior period CPI)) 100 | |||||||||
(93.25-100)/100 =-6.25% |