Question

1.

The average price of a gallon of gasoline (regular unleaded) in 1976 was $0.64. In 1998 it was $1.06. The CPI factor in 1976 is 56.9 and the CPI factor in 1998 is 163.0.   Convert the 1976 price to constant 1998 dollars. Was gas more expensive in 1976 or in 1998? Choose two correct answers.

Question 3 options:

	Gas was more expensive in 1998.
	Gas was more expensive in 1976.
	The 1976 price in 1998 constant dollars is  $1.83.
	The 1976 price in 1998 constant dollars is  $3.04.

2.

In 1989, red delicious apples cost on average $0.57 per pound. In 1998, they cost $0.94 per pound. Were apples more expensive in 1998 or in 1989? The CPI value in 1989 is 124.0 and the CPI value in 1998 is 163.0. Convert the 1989 price to constant 1998 dollars. Were apples more expensive in 1989 or in 1998? Choose two correct answers.

Question 4 options:

	The 1989 price in 1998 constant dollars is $1.24.
	The 1989 price in 1998 constant dollars is 75 cents.
	Apples were more expensive in 1989.
	Apples were more expensive in 1998.

3.

In 1948, the President of the United States earned a salary of $75,000. In 2000, the President earned a salary of $400,000. Knowing that the CPI for 1948 is 24.1 and the CPI for 2000 is 172.2, convert the 1948 salary to constant 2000 dollars. When comparing constant dollar amounts, whose salary was worth more--Harry Truman, President in 1948, or Bill Clinton, President in 2000?   Choose two correct answers.

Question 5 options:

	The 1948 salary converted to 2000 constant dollars is $535,892.
	The 1948 salary converted to 2000 constant dollars is $267,946.
	Harry Truman's salary was worth more.
	Bill Clinton's salary was worth more.

Answer 1

Question 1

Price in 1976 at constant 1998 dollars=price in 1976 at 1976 dollars*(CPI in 1998/CPI in 1976)

Price in 1976 at constant 1998 dollars=0.64*(163/56.9)=$1.83

We can see that price in 1998 is $1.06 which is lower than $1.83

It means that gas was expansive in 1976.

Correct options are

Gas was more expensive in 1976.

The 1976 price in 1998 constant dollars is  $1.83.

Question 2

Price in 1989 at constant 1998 dollars=price in 1989 at 1989 dollars*(CPI in 1998/CPI in 1989)

Price in 1989 at constant 1998 dollars=0.57*(163/124)=$0.75

At constant 1998 dollars apples are more expensive in 1998.

Correct options are

The 1989 price in 1998 constant dollars is 75 cents.

Apples were more expensive in 1998.

Question 3

Salary of US president in 1948 at 2000 dollars=Salary of US in 1948*(CPI in 2000/CPI in 1945)

Salary of US president in 1948 at 2000 dollars=75000 *(172.2/24.1)= 535892.1

We can see that Salary of Harry Truman was worth more than that of Bill Clinton, US president in 2000

Correct options are

The 1948 salary converted to 2000 constant dollars is $535,892.

Harry Truman's salary was worth more.