Question 5

Suppose CPI was $1.00 in 1913, $13.20 in 1990, and $18.59 in 2003.

a. Has the purchasing power of a dollar (i.e., how much "stuff" you can get for a dollar)increased or decreased over time? What is the change in the real value of a dollar between 1913 and 2003? (i.e., by what percenthas the "stuff" you can get for a dollar changed?)

b. You bought Abba's Greatest Hits on CD for $12 in 1990. In 2003, you saw the album selling for $15. What is the change in the real price of the CD from 1990 to 2003?

c. What was the annual inflation rate between 1913 and 1990? Between 1913 and 2003? Between 1990 and 2003?