Question

In: Economics

(x) Suppose that the CPI was 200 in 2006 and was 160 in 1996. Then according to the CPI, $100 in 2006 purchased the same amount of goods and services as $80 in 1996.

2. Which of the following statements is (are) correct?
(x) Suppose that the CPI was 200 in 2006 and was 160 in 1996. Then according to the CPI, $100 in 2006 purchased the same amount of goods and services as $80 in 1996.
(y) A worker received $5 for a daily wage in 1930. If the CPI was 17.4 in 1930 and is 215.6 today then the value of that 1930 wage in today’s dollars is more than $68.25 but less than $69.75.
(z) A business firm has an agreement with its workers to index completely the wage of its employees using the CPI. The company currently pays its production line workers $12.00 an hour and is scheduled to index their wages today. If the CPI is currently 180 and was 160 a year ago, the firm should increase the hourly wages of its workers by $1.50.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (z) only

Solutions

Expert Solution

2) x)CPI 2006=price 2006/price base year*100

CpI 1996=price 1996/price base year*100

CPI2006/CPI1996=p2006*pbase year/p base year*p1996=p2006/p1996

Cpi2006/cpi1996=200/160=10/8=5/4

P2006/p1996=100/80=10/8=5/4

So statement is true

CPItoday/CPI1930=wage today/wage 1930

215.6/17.4=wage today/5

Wage today=215.6/17.4*5=1078/17.4=61.95

So statement is false.

Z) 180/160=index new wage/12

180*12/160=new wage

New wage =13.5.

Increase wage =13.5-12=1.5

Statement is right

So option c is right x and z is right.

3)x) cpi today/ cpi 1962=price today/price 1962

Price 1962 =0.75*(cpi 1962/cpitoday)

Statement is right.

Y)same real income means ,same QUANTITY that he can buy from 2000 salary .if QUANTITY is same increased price will reflect exactly in same ratio in nominal income

CPI 2000/ cpi 2010=price 2000/price 2010=nominal income2000/nominal income2010

168.1/204.6=38,500/nominal income 2010

Nominal income 2010=38,500*(204.6/168.1)=38,500*1.2171~46,860

Statement is right

Z)New York cpi/ raleigh cpi=salary new york/ salary Raleigh

150/120=new york salary/54,000

New York salary=54000*(150/120)=54,000*1.25=67,500

Statement is right

So option A is right x am,y and z is right

Rahul Sunny answered 2 years ago

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