ch6 problem 1

problem 2

problem 3

1. Calculating inflation using a simple price index Consider a fictional price index, the College Student Price Index (CSPI), based on a typical college student's annual purchases. Suppose the following table shows information on the market basket for the CSPI and the prices of each of the goods in 2017,2018 , and 2019. The cost of each item in the basket and the total cost of the basket are shown for 2017. Perform these same calculations for 2018 and 2019 , and enter the results in the following table. Suppose the base year for this price index is 2017. In the last row of the table, calculate and enter the value of the CSPI for the remaining years. Between 2017 and 2018, the CSPI increased by Between 2018 and 2019, the CSPI increased by Which of the following, if true, would illustrate why price indexes such as the CSPI might overstate infiation in the cost of going to coliege? Check that apply. As the price of energy drinks increased relative to the price of coffee between 2017 and 2019 , students decreased their consumptlon of energy drinks and increased their consumption of coffee. The quality of textbooks increased dramatically from 2017 to 2019 , with textbook companies bundling new online study aids with their books, but this quality change is hard to measure. A new type of personal transporter, which made it easler to get around places like university campuses, became avallable for purchase. Professors required each student to buy 10 notebooks, regardless of the price. 2. Alternative price indexes Because there isn't ane single measure of inflation, the government and researchers use a variety of methods to get the most balariced picture of how prices fluctuate in the economy, Two of the most commonly used price indexes are the consumer price index (CPI) and the GDP deflator. The GDP deflator for this year is calculated by dividing the using.usingbytheandmultiplyingby100 However, the CPt reflects only the prices of all goods and services Consider golfers who led the Professional Golfers' Association of America (PGA) in winnings at different points in time. Note that the winnings are nominal figures (unadjusted for inflation). To convert the original earnings of Casper, Milier, and Pavin, wse the formula for converting dollar figures from an earlier era into year 2016 U.5. doliars. Using those figures, fill in the following table, making sure to round your responses to the nearest U.S. doliar: True or False: According to the previous table, the golfer with the highest PGA winnings in nominal dollars is the same as the goifer with the highost PGA winnings atter adjusting for inflation. True Faise