Answer the following questions?

Question

The Barrows decide not to sell their house even though it is worth ten times more than what they paid for it. Why is their argument valid? What argument could there be for them to sell their home and move to a different city?

Use an example from the graph of the different grocery items and their changes in price to explain the concept of inflation.

How are most people likely to adjust their spending when prices for consumer goods are rising?

Place the following items into a category in the CPI Market Basket: toothpaste, a bicycle, a book, prescription sunglasses, shoes, a banana, and a trip to the movies.

How are the CPI and the rate of inflation related? Explain how the CPI affects the rate of inflation.

The core inflation rate was developed to exclude some economic data. What information supports the logic behind the development of the core inflation rate?

How could you modify the illustration to include the effects of low unemployment on the wage-price spiral?

Explain why inflation sometimes, but not always, erodes income.

Lydia has $1,000 in her savings account. Currently, the rate of inflation is 3 percent, and the interest rate on her savings account is 4 percent. She has decided that if the rate of inflation goes above 3 percent, she will take her money out of her savings account because she won't be making any money in interest. Is her argument valid? Explain.

What information in the section "Recent Trends in Inflation" provides support for the concept of measuring the core inflation rate?

Infer how the severe recession in 2008 affected purchasing power at the beginning of the recession, and why that purchasing power did not necessarily improve even as prices began to drop.