Question

Please show work!

CPI Applied Example:

Year	1980	2018
Resident Tuition	$350	$4,570
Consumer Price Index	92.4	245.300

What is the cumulative inflation rate between 1980 and 2018?    16) ______

A) 165%               B) 392%

C) 1,206%            D) none of the above

17) Given:

What is the nominal increase in tuition between 1980 and 2018?                17) ______

A) 165%               B) 392%

C) none of the above        D) 1,206%

18) Given:

What is the real increase in tuition between 1980 and 2018?        18) ______

A) 392%               B) 1,206%

C) none of the above        D) 165%

19) Given:

What is the real 1980 tuition in 2018 dollars         19) ______

A) $4,,570            B) $1,863

C) $929 D) none of the above

Answer 1

16) A) 165%
Inflation rate = [(CPI in 2018-CPI in 1980)/CPI in 1980]*100 = [(245.3 - 92.4)/92.4]*100 = (152.9/92.4)*100 = 165%

17) B) 1,206%
Nominal increase in tuition = [(Resident tuition in 2018-Resident tuition in 1980)/Resident tuition in 1980]*100
= [(4570-350)/350]*100 = (4220/350)*100 = 1206%

18) A) 392%   
Real resident tuition in 1980 = Resident tuition in 1980/CPI in 1980 = 350/92.4 = 3.79
Real resident tuition in 2018 = Resident tuition in 2018/CPI in 2018 = 4570/245.3 = 18.63
Real increase in tuition = [(Real resident tuition in 2018-Real resident tuition in 1980)/Real resident tuition in 1980]*100
= [(18.63-3.79)/3.79]*100 = (14.84/3.79)*100 = 392%

19) C) $929
The real 1980 tuition in 2018 dollars =  Resident tuition in 1980*(CPI in 2018/CPI in 1980) = 350*(245.3/92.4) = 85,855/92.4 = 929