a) Percentage change in the price of food and clothing for the 2004 and 2005 period.
Percentage change in the price of food
Change in food price $12-$8= $4
Percentage change= X100%
= 50%
The price of food between the years 2004 and 2005 changed by 50%
Percentage change in clothing price
Price change= $40-$20 = $20
Percentage change= X100%
= 100%
There was a 100% change in the clothing price between the year 2004 and 2005.
b) Percentage change in Consumer Price Index
Where % CPI= X 100%
($8 X 100 units) + ($20X 20 units) =$1200
Therefore, $1200 was the market basket cost for the year 2004.
($12X100 units) + ($40X 20 units) = $2000
The market basket cost for the year 2005 amounted to $2000
The increase in the Consumer Price Index = (2000-1200) = 800
Percentage increase in CPI= X100%
=66.7%
c) The CPI price change affected people differently. The clothing price for instance, witnessed higher increment than food price (Hall " Lieberman, 2010). The variation suggest that the segment of the consumers that bought more clothing were adversely affected by the CPI price change contrary to the other portion who purchased more food than cloths.
Question 2
a) CPI being 18 in 1925 with a movie ticket costing $0.30, in terms of today’s dollar
(0.30X180)/18 = 3
The movie ticket is now worth $3 in today’s dollar.
b) A cook earned $20 weekly in 1930 when the CPI stood at 14. In today’s dollar the cook weekly wage is;
($20X180) / 14= $257.14
c) $0.20 was the cost of a gas of gallon in 1940 when the CPI was 16. In today’s dollar, a gas of gallon is;
(0.20X180)/16= $2.25
The gas gallon costs $2.25 in the dollar of today when 180 is used as the current price index.
Question 3
Country
Adult population
Labor force
employed
unemployed
Rate of unemployment
Labor-Force Rate of Participation
A
120,000
64,500
60,000
4,500
6.98
53.8
B
46,667
28,000
25,000
3,000
10.71
60
C
70,000
40,000
36,000
4,000
10
57.14
Where;
The rate of unemployment = number of unemployed persons/labor force
Labor force= number of employed + number of unemployed
Labor force rate of participation= labor force/ population of adults
Question 4
According to Mankiw (2011), Real GDP= Nominal GDP/deflator
I.e. Real GDP=
For 1987, real GDP for each person =
= 26,481
For 2005, real GDP for each person
=37,397
Therefore the percentage change in real GDP X 100%
= 41.2%
References
Hall, R. E., " Lieberman, M. (2010). Macroeconomics: Principles " applications. Australia: South-Western Cengage Learning.
Mankiw, N. G. (2011). Principles of economics. Mason, Ohio: Thomson South-Western.
