Question 3

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 & Continue3. Productivity and growth policies Consider a hypothetical small island nation in which the only industry is publishing. The following table displays information about the economy over a two year period. Complete the table by calculating physical capital per worker as well as labor productivity. Hint: Recall that productivity is defined as the amount of goods and services a worker can produce per hour. In this problem, measure productivity as the quantity of goods per hour of labor. Physical Capital Labor Force Physical Capital per Worker Labor Hours Output Labor Productivity Year (Printing presses) (Workers) (Printing presses) (Hours) (Books) (Books per hour of labor) 2032 160 40 2,000 20,000 2033 180 60 3,900 29,250 Based on your calculations, in physical capital per worker from 2032 to 2033 is associated with in labor productivity from 2032 to 2033. Suppose you're in charge of establishing economic policy for this small island country. Which of the following policies would lead to greater productivity in the publishing industry? Check all that apply. O Subsidizing research and development into new publishing technologies Sharply increasing the interest rate on student loans to people pursuing advanced degrees in publishing Imposing restrictions on foreign ownership of domestic capital O Offering free public education to every worker in the country Grade It Now Save & Continue