PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 6, Problem 2RQ
To determine
Explain the difference between the
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Suppose the price level reflects the number of dollars needed to buy a basket of goods containing one can of soda, one bag of chips, and one comic book. In year one, the basket costs $10.00.
In year two, the price of the same basket is $11.00. From year one to year two, there isinflation at an annual rate of .
In year one, $70.00 will buy7 baskets, and in year two, $70.00 will buy baskets.
This example illustrates that, as the price level rises, the value of money
The CPI’s basket of goods includes potato chips, over half of which are made from potatoes grown in Idaho. Wildfires this summer destroyed acres of potato crops in Idaho, causing a spike in the price of potatoes, and there was a 30% increase in the price of potato chips. As a result, the CPI calculation showed an increase of 2% in the Fall of this year versus last year. Please explain if this 2% increase is reflective of the overall price level, and if not, why?
For country A: CPI March 2021 is 523.5, and CPI April 2021 is 532.5. For country B: CPI March 2021 is 264.8, and CPI April 2021 is 266.8. We can say that
The inflation rate in April was 1.7% in country A and 0.8% in country B.
In April country A has a higher inflation rate than country B because the CPI increased by 9 points for country A and CPI increased by 2 points in country B.
The overall price level in country A is approximately twice the overall price level in country B, because country A's CPI is almost two times the CPI of country B.
In both March and April country A has a higher inflation rate than country B because for both months CPI is country A is higher than the CPI in country B.
Chapter 6 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
Ch. 6 - Prob. 1RQCh. 6 - Prob. 2RQCh. 6 - Prob. 3RQCh. 6 - Prob. 4RQCh. 6 - Prob. 5RQCh. 6 - Prob. 6RQCh. 6 - Prob. 7RQCh. 6 - Prob. 8RQCh. 6 - Prob. 1PCh. 6 - Prob. 2P
Ch. 6 - Prob. 3PCh. 6 - Prob. 4PCh. 6 - Prob. 5PCh. 6 - Prob. 6PCh. 6 - Prob. 7PCh. 6 - Prob. 8PCh. 6 - Prob. 9PCh. 6 - Prob. 10PCh. 6 - Prob. 6.1CCCh. 6 - Prob. 6.2CCCh. 6 - Prob. 6.3CCCh. 6 - Prob. 6.4CCCh. 6 - Prob. 6.5CCCh. 6 - Prob. 6.6CCCh. 6 - Prob. 6.7CCCh. 6 - Prob. 6.8CCCh. 6 - Prob. 6.9CC
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