Consumer Price Index MONEY, CREDIT. All Urban Consumers 1970 -2015 MARKETS Base Period (1982-1984) = 100 Year Jan Feb Mar 1970 37.80 Apr May 38.00 38.20 Jun Aug 1971 39.80 38.50 Jul 39.90 38.60 Sep Oct 38.80 Nov Dec Annual 40.00 39.00 39.00 39.20 39.40 39.60 39.80 38.80 1972 41.10 40.10 41.30 40.30 41.40 40.60 40.70 41.50 40.80 41.60 40.80 40.90 40.90 41.10 40.50 1973 42.60 42.90 43.30 41.70 41.90 42.00 1974 43.60 42.10 42.30 42.40 42.50 41.80 46.60 43.90 47.20 44.20 47.80 44.30 48.00 45.10 45.20 45.60 45.90 46.20 44.40 1975 52.10 48.60 49.00 52.50 49.40 52.70 50.00 50.60 51.10 51.50 51.90 49.30 52.90 1976 55.60 53.20 55.80 53.60 54.20 $5.90 54.30 54.60 54.90 55.30 55.50 53.80 56.10 1977 58.50 56.50 59.10 56.80 57.10 57.40 57.60 57.90 58.00 58.20 56.90 59.50 60.00 1978 62.50 60.30 60.70 61.00 62.10 60.60 62.90 63.40 61.20 61.40 61.60 61.90 63.90 64.50 65.20 1979 65.20 68.30 65.70 66.00 66.50 67.10 67.40 67.70 69.10 69.80 70.60 71.50 1980 72.30 77.80 73.10 73.80 74.60 75.20 75.90 76.70 72.60 78.90 80.10 81.00 81.80 82.70 82.70 83.30 84.00 84.80 85.50 86.30 82.40 1981 87.00 87.90 88.50 89.10 89.80 90.60 91.60 92.30 93.20 93.40 93.70 94.00 90.90 1982 94.30 94.60 94.50 94.90 95.80 97.00 97.50 97.70 97.90 98.20 98.00 97.60 96.50 1983 97.80 97.90 97.90 98.60 99.20 99.50 99.90 100.20 100.70 101.00 101.20 101.30 99.60 1984 101.90 102.40 102.60 103.10 103.40 103.70 104.10 104.50 105.00 105.30 105.30 105.30 103.90 1985 105.50 106.00 106.40 106.90 107.30 107.60 107.80 108.00 108.30 108.70 109.00 109.30 107 60 1986 109.60 109.30 108.80 108.60 108.90 109.50 109.50 109.70 110.20 110.30 110.40 110.50 109.60 1987 111.20 111.60 112.10 112.70 113.10 113.50 113.80 1 14.40 115.00 115.30 115.40 115.40 113.60 1988 115.70 116.00 116.50 117.10 117.50 118.00 118.50 119.00 119.80 120.20 120.30 120.50 118.30 1989 121.10 121.60 122.30 123.10 123.80 124.10 124.40 124.60 125.00 125.60 125.90 126.10 124.00 1990 127.40 128.00 128.70 128.90 129.20 129.90 130.40 131.60 132.70 133.50 133.80 133.80 130.70 1991 134.60 134.80 135.00 135.20 135.60 136.00 136.20 136.60 137.20 137.40 137.80 137.90 136.20 1992 138.10 138.60 139.30 139.50 139.70 140.20 140.50 140.90 141.30 1 141.80 142.00 141.90 140.30 1993 142.60 143.10 143.60 144.00 144.20 144.40 144.40 144.80 145.10 145.70 145.80 145.80 1 144.50 1994 146.20 146.70 147.20 147.40 147.50 148.00 148.40 149.00 149.40 149.50 149.70 149.70 148.20 1995 150.30 150.90 151.40 151.90 152.20 152.50 152.50 152.90 153.20 153.70 1 153.60 153.50 152.40 1996 154.40 154.90 155.70 156.30 156.60 156.70 157.00 157.30 157.80 158.30 158.60 158.60 156.90 1997 159.10 159.60 160.00 160.20 160.10 160.30 160.50 160.80 161.20 161.60 161.50 161.30 160.50 1998 161.60 161.90 162.20 162.50 162.80 163.00 163.20 163.40 163.60 164.00 164.00 163.90 163.00 1999 164.30 164.50 165.00 166.20 166.20 166.20 166.70 167.10 167.90 168.20 168.30 168.30 166.60 2000 168.80 169.80 171.20 171.30 171.50 172.40 172.80 172.80 173.70 174.00 174.10 174.00 172.20 2001 175.10 175.80 176.20 176.90 177.70 178.00 177.50 177.50 178.30 177.70 177.40 176.70 177.10 2002 177.10 177.80 1 178.80 179.80 179.80 179.90 180.10 180.70 181.00 181.30 181.30 180.90 179.90 2003 181.70 183.10 184.20 183.80 183.50 183.70 183.90 184.60 185.20 185.00 184.50 184.30 2004 185.20 186.20 187.40 188.00 189.10 184.00 189.70 189.40 189.50 189.90 2005 190.70 191.80 193.30 194.60 194.40 190.90 191.00 190.30 194.50 188.90 195.40 196.40 198.80 199.20 2006 197.60 198.30 198.70 199.80 201.50 202.50 202.90 203.50 203.90 202.90 196.80 195.30 201.80 201.50 2007 202.42 203.50 205.35 206.69 201.80 201.60 214.82 207.95 208.35 208.30 207.92 208.49 208.94 210.18 210.04 207.34 2008 211.08 211.69 213.53 216.63 218.82 219.96 219.09 2 2009 211.14 212.19 212.71 213.24 213.86 215.69 215.35 218.78 216.57 212.43 210.23 215.30 2010 216.69 215.83 215.97 216.18 216.33 215.95 214.54 2011 220.22 216.74 217.63 218.01 218.18 217.97 218.01 218.31 218.44 218.71 2 221.31 223.47 224.91 218.80 219.18 218.06 225.96 225.72 225.92 226.55 226.89 226.42 226.23 225.67 2012 226.67 227.66 229.39 230.09 229.82 229.48 229.10 230.38 224.94 2013 230.28 232.17 232.77 231.41 231.32 230.22 232.53 232.95 233.50 233.60 233.88 234.15 233.55 229.60 229.59 2014 233.92 234.78 236.29 237.07 237.90 238.34 238.25 237.85 238.03 237.43 233.07 233.05 232.96 2015 233.71 234.72 236.12 236.60 237.81 238.64 238.65 238.32 237.95 237.84 236.15 234.81 236.74 291) Write a short paragraph comparing the following price indices: GDP price index (implicit price deflator), Consumer Price Index, and the Core CPI. 2) Use page 29 of the Macro Data Packet. a) Fill in the following table. Year 1970-1971 1980-1981 1990-1991 2000-2001 2010-2011 4) Suppose that the CPI is 100 in 1992. In 1993 and 1994 the CPI rose to 112 and 120, respectively. During 1995 the economy experienced an ination of 10 percent. a) If consumption in 1994 was 300 billion in 1994 dollars, What is this consumption expressed in 1992 dollars? b) What is the 1995 value of the CPI? 5) The consumer price index (CPI) is used to adjust social security and other benefits, as well as income tax-brackets. Republicans in the congress and senate are horrified that the CPI is overstating the rate of inflation. The republicans would like to halve the budget deficit and demand that the BLS develop new methodologies to combat the CPI bias. The BLS responds, use the personal consumption expenditure index (PCE index). a) How does the CPI compare to the PCE index? b) A budget deficit occurs when government spending exceeds tax revenue. If congress adopts the PCE index, how will this change affect the budget deficit through social security benefits? What will happen to the COLA?3) The federal minimum wage in May of 1975 was $2.10 per hour. Forty years later, the federal minimum wage rose to 37.25 (as of August 2015). The core CPI for urban workers was 53.50 in May of 1975 and 242.65 in August of 2015. Use the information from above to answer the following questions. . a) Convert the May 19?5 minimum wage and August 2015 minimum wage into base year dollars. b) Would you rather be a minimum wage worker in 1975 or 2015? Explain using the idea of purchasing power. c) Using 2015 dollars, calculate the wage differential between 1975 and 2015 minimum wage workers. Interpret the number. d) Convert the August 2015 minimum wage into May 1975 dollars. 6) The data table below contains a hypothetical market basket of goods. Use the data table to answer the questions below. Goods and Services Quantity (pounds) Price 2015 Price 2016 Price 2017 pasta 4 3.5 3.6 3.6 rice 2 3.5 3.6 4 apples 2 2 3 3.5 a) Assume 2015 is the base the year, calculate the consumer price index for 2015,2016 and 2017. Show work and place your nal answers in the table below. Year CPI 2015 2016 2017 b) Using the CPI values from part (a), ll in the table below. Show work and place your nal answers in the table below. Time Span TC 2015-2016 2016-2017 c) Substitution bias can cause the CPI to overstate ination according to the Boskin Report. Assume that pasta and rice are perfect substitutes. Calculate the upward bias in the inflation rate between 2016 and 2017' using the data from above. (Hint: you will rst need to recalculate the CPI in 2017 to account for substitution in the market basket.) Multiple Choice: 1) February 2010, the price of gasoline in the Florida was $2.25 per gallon and the CPI was 202.4 with a base period of 1982 to 1984. What was the real price of gasoline per gallon in base period dollars? A) $2.25 per gallon B) $1.50 per gallon C) $1.99 per gallon D) $1.25 per gallon E) $1.11 per gallon 2) The bias in the CPI typically A) overstates inflation. B) understates inflation. C) about half the time overstates and about half the time understates the inflation rate. D) cannot be measured or estimated. 3) "Note that the percent change in the GDP deator is being used as the measure of ination rather than the more familiar CPI. The GDP deator is a price index that samples , not just those paid by consumers." The blank should be a) all prices, including imports b) prices of all domestically-produced goods and services c) prices of all domestically-produced goods and services except exports d) prices of all domestically-produced goods and services except those produced by government 4) According to the Bureau of Labor Statistics, to be officially unemployed a person must: A. be in the labor force. B. be 21 years ofage or older. C. have lost a job. D. be waiting to be called back from a layoff 5) Unemployment caused by the uctuation of the business cycle is called unemployment. A) structural B) recession-related C) frictional D) cyclical 6) The Consumer Price Index is calculated by the following agency _. A. Bureau of Labor Statistics B. Bureau of Economic Analysis C. National Bureau of Economic Research D. Treasury Department Year CPI 1994 90.0 1996 95.5 1998-2000 100.0 2002 104.0 7) The table above gives the CPI for a nation. Based on the table, we can determine that the reference base period is A) 1994. B) 1996. C) 1998-2000. D) 2002. E) More information about when the Consumer Expenditure Survey was undertaken is needed to answer the question. 8) In August 2012, the CPI inflation rate was 0.6 percent while the core CPI inflation rate was 0.1 percent. The difference between these two measurements of inflation indicates A) prices for food and fuel were increasing more rapidly than prices for other goods. B) prices for food and fuel were increasing less rapidly than prices for other goods. C) the underlying inflation rate was higher than the overall inflation rate. D) a negative underlying inflation rate. 9) Suppose the price index is 110 and a typical basket of goods and services costs $3,300. What would this typical basket have cost in the base year? A) $30 B) $3,000 C) $3,630 D) not enough information to tell 10) Suppose the price of soda was 15 cents in 1970, when the CPI was 50, and 50 cents in 2007 when the CPI was 172, convert the 2007 price of soda into 1970 dollars A) .1453 B) .17 C) .2245 D). 90 E) .12