Formula for the relationship between the purchasing power of the U.S. dollar and the price level. The purchasing power of the U.S. dollar is ( directly, inversely ) related to the price level: when the consumer price index (CPI) goes up, the value of the dollar goes (down, up ). Higher prices ( increase, decrease) the dollar's purchasing power because people need (fewer, more ) dollars to obtain specific quantity of goods and services. Value of the dollar ($V) =

Formula for the relationship between the purchasing power of the U.S. dollar and the price level. The purchasing power of the U.S. dollar is ( directly, inversely ) related to the price level: when the consumer price index (CPI) goes up, the value of the dollar goes (down, up ). Higher prices ( increase, decrease) the dollar's purchasing power because people need (fewer, more ) dollars to obtain specific quantity of goods and services. Value of the dollar ($V) =

Exploring Economics

8th Edition

ISBN:9781544336329

Author:Robert L. Sexton

Publisher:Robert L. Sexton

Chapter22: Aggregate Demand And Aggregate Supply

Section: Chapter Questions

Problem 10P

See similar textbooks

Similar questions

5 According to the latest measures, 1 USD = 147 JPY, 1 EUR = 145.51 JPY, and 1 EUR = 0.95 USD Calculate the shadow price between EUR and JPY
What is the value of the basket of goods for 1981? 1980 Base Year 1981 QTY Item Price Qty Item Price 1 Rubik's Cube 4.99 Rubik's Cube 5.25 1 Atari 2600 119.00 3 Atari 2600 126.99 8.95 1 Duran Duran Album 1 Duran Duran Album 9.55 1 Pop Rocks 0.48 2 Pop Rocks 0.69 1 Gallon Of Gas 1.13 1 Gas Gallon Of 1.19 1 Bugle Boy 29.95 3 Bugle Boy 32.75 Parachute Pants Раrachute Pants 1 Рас Мan Pajamas 15.00 Рас Мan 15.00 Pajamas
Suppose an economy consumes only two goods: food and entertainment. The following table shows quantities consumed and prices for three years: Year 0 (the base year), Year 1, and Year 2. QUESTION; compute inflation rates (from year 0 to year 1 and from year 1 to year 2) based on GDP deflator Item Year 0 Year 1 Year 2 Quantity (units) Price ($ / unit) Quantity (units) Price ($ / unit) Quantity (units) Price ($ / unit) Food 50 5 75 6 80 4 Entertainment 100 12 110 11 115 14
Problem 3: Again, consider the country of Opalia that produces two goods: footballs and basketballs. Below is a table showing prices and quantities of common consumer purchases for the past three years: Price of Footballs Price of Basketballs Qd Footballs Qd Basketballs Year Year 1 10 12 33 4 Year 2 12 4 15 Year 3 18 14 a) Compute the CPI index (using year 1 as the base). b) Compute the inflation rate. c) Compare the answer to part b) and the answer you found for problem 1, part d)? What is the origin of the difference?
a) Explain how real interest rate affects net exports b) A friend from the U.S. visited Ghana and exclaimed that cost of living for visitors to Ghana is much cheaper now than it was 2 years ago. According to your friend, 2 years ago, a dollar was equivalent to 5 cedis. Today, a dollar buys 7.5 cedis. Is your friend right or wrong, if inflation over the 2-year period is 25 percent in the U.S. and 100 percent in Ghana?
Suppose the Consumer Price Index for 2012 was 121.8 and for 2014 it was 125.2. (a) Determine the purchasing power of the dollar in 2012 and 2014 relative to the base year 2002. (b) Compute the purchasing power of the dollar in 2014 relative to 2012. (a) The purchasing power of the dollar in 2012 is. (Round to three decimal places as need.) The purchasing power of the dollar in 2014 is (Round to three decimal places as need.) (b) The purchasing power of the dollar in 2014 relative to 2012 is. (Round to three decimal places as need.)
Locate an example of the localized Atlanta/Sandy Springs/Roswell CPI that is performing better than the national CPI. State the two numbers you researched--local and national-- and forecast based on the October data how you think the November data will look for both local/national CPIs. Will the local CPI continue to perform better than national? Will it slow down to align with national? Locate an example of the localized Atlanta/Sandy Springs/Roswell CPI that is performing worse than the national CPI. State the two numbers you researched--local and national-- and forecast based on the October data how you think the November data will look for both local/national CPIs. Will the local CPI improve so that it is more in line with the national CPI?
Economics The following table gives the exchange rates of the South African Rand and the US dollar (USD) against the pound sterling (GBP). The exchange rates are defined as the number of Rand or USD per 1 GBP. Answer parts (a), (b), and (c) based on this data, then answer part (d). 22 December 2015 | 22 December 2016 Rand/GBP 22.53 17.29 |USD/GBP 1.48 1.23 (a) Did the Rand appreciate or depreciate against the GBP in 2016? (b) Did the Rand appreciate or depreciate against the USD in 2016? (c) If the UK is the home country, how do expect net exports between UK and South Africa to have changed in 2016? (d) Two hypothetical countries A and B are identical in every way except B has a higher proportion of credit-constrained households. Suppose, that simultaneously, both countries experience an equivalent increase in demand for their exports. Would the countries experience the same change in national income, or would they be different?
The first two columns of the table below describe the goods and quantities included in your current monthly consumption. Suppose you have been able to use all of your monthly income (no savings) to afford this level of fixed consumption over the last few years despite the increase in the cost of living. • Round all expenditure calculations to the nearest dollar. • Round CPI and inflation (expressed as an integer) to 1 decimal place. • Carry your rounded figures throughout the rest of the problem. 2018 2019 2020 Basket Prices Prices Item Prices Quantities Meal Kit Delivery $106.00 8 $107.00 $110.25 $48.25 $50.00 $46.00 $53.00 Water 16 Hydro Electricity 14 $56.90 $58.75 Dry cleaning $62.00 10 $64.75 $68.00 Entertainment $26.00 17 $28.75 $32.80 Part (a): Using the quantities specified in the 2018 basket of goods, calculate the CPI for 2018, 2019 and 2020. Part (b): What is the inflation rate between 2018 and 2019? 2019 and 2020? Part (c): Suppose inflation is expected to remain constant…
The table below details Student A's monthly purchases during 2019 and 2020. Answer the following questions writing out dollars and cents for monetary values e.g. $1.00, item weights to two decimal places e.g. 0.10, price index values as whole numbers without decimals, e.g. 110, and percentages to one decimal place e.g. 1.0%. Hotdogs Cans of Cola Chocolate bars Magazines Movies Prices ($) 2019 2.70 1.30 1.00 6.50 6.00 2020 2.80 1.25 1.00 7.50 5.75 Quantities (# consumed per month) 2020 With 2019 as the base year this index has changed by 2019 2 16 7 3 2 1 18 7 a. The value of Student A's 2019 shopping basket using 2019 prices is $ The item weights associated with this shopping basket are for magazines, and for movies. b. The value of Student A's 2019 shopping basket using 2020 prices is $ If 2019 is used as the base year, the 2020 value of Student A's price index is 2 3 for hotdogs, for cola, for chocolate bars, and the 2019 value of this index is then % between 2019 and 2020.
The consumers in the economy buys only two general types of products: Apples, and Bananas. Price and Quantity information of these items over a period are shown below: Year 2019 Year 2020 Product Quantity Average Price per Unit Quantity Average Price per Unit Apples 7 $5 9 $12 Bananas 18 $10 7 $16 Using year 2020 as the base year, the economy's consumer price index (CPI) in year 2019 is ______. (Your answer should include the first decimal point, if any.)
Congratulations! Your boss has given you a raise. However, you want to know whether your purchasing power has increased, since inflation is also rising. The table below gives you data for wages and the Consumer Price Index (CPI) for the last two years. Wage ($/day) CPI Year 1 $ 2000 CPI 120 Year 2 $2200 CPI 129.6 The nominal percentage increase in your wage is enter your response here%. (Round your answer to one decimal place.) Part 2 The real percentage increase in your wage is enter your response here%. (Round your answer to one decimal place.)