In: Economics
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
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
Y)
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