Problems for Chapter 11
The residents of
Vegopia spend all of their income on cauliflower, broccoli, and carrots. In
2010, they buy 100 heads of cauliflower for $200, 50 bunches of broccoli for
$75, and 500 carrots for $50. In 2011, they buy 75 heads of cauliflower for
$225, 80 bunches of broccoli for $120, and 500 carrots for $100.
a. Calculate the price of each vegetable in each
2010 as the base year, calculate the CPI for each year (use 100 heads of
cauliflower, 50 bunches of broccoli, and 500 carrots as the market basket).
is the inflation rate in 2011?
makes cost of living adjustments to Social Security benefits each year in
proportion to the increase in the CPI, even though most economists believe that
the CPI overstates inflation.
the elderly consume the same market basket as other people, does Social
Security provide the elderly with an improvement in their standard of living
each year? Explain.
fact, the elderly consume more healthcare compared to younger people, and
healthcare costs have risen faster than overall inflation. What would you do to
determine whether the elderly are actually better off from year to year?
Out of each of the
following pairs of goods, which is more expensive when the price of the good is
expressed in the value of today’s dollars?
You will need to use CPI
data from FRED to answer these questions. Please show your work.
$0.15 copy of the New York Times in January
1970 or a $2.50 copy of the New York
Times today (note: use December 2014
CPI data for the CPI “today”).
$1,300 Apple IIc computer in April 1984 or a $1,799 MacBook Pro today.
$305 economy class round trip plane ticket from Los Angeles to New York in July
1974 or a $1,286 first class round trip plane ticket from Los Angeles to New
$2.48 gallon of milk in July 1991 or a $3.58 gallon of milk today.
Problems for Chapter 12
show a positive correlation between income per person and the health of a
how higher income might cause better health outcomes.
how better health outcomes might cause higher incomes.
might the relative importance of your two hypotheses be relevant for public
show a positive correlation between political stability and economic growth.
what mechanism could political stability lead to strong economic growth?
what mechanism could strong economic growth lead to political stability?
There are many
sources of estimates of countries’ real per capita GDP, but the most trusted
and commonly used estimates come from the Penn
World Tables. However,
we’ll focus on real GDP per capita for the United States for this problem, which
is available through FRED.
the annual growth rate of real GDP per capita (percentage change in real GDP
per capita compared to the same quarter in the previous year) from the 1st
quarter of 1948 to the present. What is
the average annual growth rate of real GDP per capita since 1948?
is the average annual growth rate of real GDP per capita since 2000?