Answered step by step
Verified Expert Solution
Link Copied!

Question

1 Approved Answer

ube Maps The textbook discusses the many uses of the CPI. Among these many uses is converting dollar amounts from previous time periods to a

image text in transcribed

image text in transcribed
ube Maps The textbook discusses the many uses of the CPI. Among these many uses is converting dollar amounts from previous time periods to a different time period. These dollar amounts from previous years could be salaries or prices of goods and services. This is a useful tool for comparing the real change in prices. For example, suppose an elderly couple purchased a home in 1965 for $50,000 but today the house is valued at $425,000. The appearance is that this couple got a really good deal, and that housing pri have gotten completely out of control. However, if we use the formula provided in the textbook to convert $50,000 to more current figures we come away with a different perspective. So, to convert $50,000 to 2019 numbers use CPI values from 1965 and 2019. (data from www.usinflationcalculator.com). CPI 1965 = 31.5 CPI 2019 = 255.657 Plug into the formula: $50,000 x 255.657/31.5 = $405,804.76.... This number expresses the value of the house in 2019 values. The $50,000 they paid back then is the same as paying $405,804.76 2019 dollars in 2019. Another way to express this is to say that the $50,000 back in 1965 had the same purchasing power as $405,804.76 in 2019 dollars. That is, that $50,000 from 1965 could buy $405,804.76 worth of stuff in 2019. Given this calculation it is clear that the house's real value didn't change so much. How much more did the house's real value change by when using 2019 numbers? Only by +4.7%! (425,000 - 405,804.76)/405,804.76. Your task is to identify the price of a good or service in some previous year and convert it to current dollars and discuss how much the good or services real value changed by. Also discuss why you think it might have changed (or did not change). To get the CPI values that you will need, you can CLICK HERE, e and you will be taken to a listing of CPI values from 1913 - present. You will be graded according to the following criteria: . Providing a substantive response of not less than 100 words, demonstrating you have given serious thought to the post. . Using economic terms to support your answer. . Meeting college level writing expectations (proper grammar, punctuation, stylistically sound, etc.). . Replying to at least two other students

Step by Step Solution

There are 3 Steps involved in it

Step: 1

blur-text-image

Get Instant Access to Expert-Tailored Solutions

See step-by-step solutions with expert insights and AI powered tools for academic success

Step: 2

blur-text-image

Step: 3

blur-text-image

Ace Your Homework with AI

Get the answers you need in no time with our AI-driven, step-by-step assistance

Get Started

Recommended Textbook for

Essentials Of Advanced Macroeconomic Theory

Authors: Ola Olsson ]

1st Edition

9780415685085

More Books

Students also viewed these Economics questions

Question

What are the pros and cons of a regional organization structure?

Answered: 1 week ago

Question

How comparable are the groups in causal comparative studies?

Answered: 1 week ago

Question

6. How can a message directly influence the interpreter?

Answered: 1 week ago