Question 1

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1. Calculating inflation using a simple price index Consider an imaginary price index, the Undergraduate Price Index (UPI), created to represent the annual purchases made by a typical undergradute. The following table contains information on the market basket for the UPI and the price of each good in 2020, 2021, and 2022. The cost of each good in the basket as well as the basket's total cost are given for 2020. Perform these same calculations for 2021 and 2022, and enter the results in the following table. 2020 2021 2022 Price Cost Price Cost Price Cost Quantity in Basket (Dollars) (Dollars) (Dollars) (Dollars) (Dollars) (Dollars) Streaming services 1 64 64 104 134 Iced coffees 150 2 300 2 2 Textbooks 10 80 800 85 105 Notebooks 8 2 16 4 Energy drinks 40 3 120 5 Total cost 1,300 Price index 100 Suppose this price index uses 2020 as the base year.In the last row of the table, calculate and enter the value of the UPI for the remaining years. Between 2020 and 2021, the UPI increased by . Between 2021 and 2022, the UPI increased by % Which of the following, if true, would illustrate why price indexes such as the UPI might overstate inflation in the cost of going to college? Check all that apply. Professors required each student to buy eight notebooks, regardless of the price. Energy drinks became increasingly popular on college campuses between 2020 and 2022 due to significant improvements in flavor, but this quality change is hard to measure. A new, cheaper internet option rolled out services nationwide. As the price of premium streaming services rose, fewer students decided to buy them, opting instead to borrow log-in information from friends and relatives. Grade It Now Save & Continue2. Alternative price indexes Because there isn't one single measure of inflation, the government and researchers use a variety of methods to get the most balanced 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 by the using and multiplying by 100. However, the CPI reflects only the prices of all goods and services Indicate whether each scenario will affect the GDP deflator or the CPI for the United States. Check all that apply. Shows up in the... GDP Scenario Deflator CPI A decrease in the price of a South Korean-made furniture that is popular among U.S. consumers O O An increase in the price of a Smooth Streets Industries pothole puncher, which is commercial construction equipment 0 0 made in the U.S. but not bought by U.S. consumers Grade It Now Save & Continue