1. In October 1979 the Consumer Price Index (CPI) was 75.2, and in October 1980 it was 84.7 Calculate the inflation rate from October 1979 to October1980. Show your work. 617-752100.095% 2. In 1997 the median wage for purchasing managers in Eau Claire was $13.74 per hour. (Source: https://www.bls.gov/oes/tables.htm.) Was this a good wage? To answer this, convert the wage into today's dollars. The CPI in 1997 was 160.5, and let's assume that the CPI now is 295. How much would $13.74 in 1997 be equivalent to in today's dollars? Show your work, 295416015) = 1.345% 13.71 x 1.31518.48 3. In 1981 an IBM 5150 personal computer, which had two 160KB 5.25-inch floppy disk drives for storage (and no hard drive), sold for prices starting at $1,565. How much is this in today's dollars? The CPI in 1981 was 90.9, and let's assume again that the CPI today is 295. How much would $1,565 in 1981 be equivalent to in today's dollars? Show your work. 295-909 100 $$$$$$$$$$$$$$$$$$$$ 2.041% $1.565 $3194.17 $$$$$$$$ 4. U.S. GDP in 2012 was $16,020 billion, and GDP in 2013 was $16,570 billion. Did the economy grow from 2012 to 2013 in real terms? The CPI in 2012 was 229.5, and the CPI in 2013 was 233.0. a. Use the Babe Ruth formula (from slide # 15 and slide #16 in the Price Level and Inflation PowerPoint in Canvas) to convert 2013 GDP into 2012 dollars. Show your work. 16,570 233 229516,321.09 b. Using your answer from part (a), calculate the real growth rate of the economy from 2012 to 2013. Show your work. 16570-16,321.09 =2.49% 100 c. Did the economy grow from 2012, or did it decline? $$$$$$$$$$$$$$$$$$$$ It grew 5. Treasury bills-or "T-bills" - are an important type of short-term bond issued by the U.S. Treasury Department. The interest rate (or "yield") on T-bills is often used as an indicator of the level of short-term interest rates in the economy, or the cost of short-term credit. In 1980 the interest rate on T-bills was 15%, and the expected inflation rate was 13%. In 1986 the interest rate on T-bills was 7%, and the expected inflation rate was 3%. In which year was the real cost of credit (that is, the real interest rate) higher? Check one answer below, and then briefly explain your reasoning the real cost of credit was higher in 1980 the real cost of credit was higher in 1986