Question

- In 2014, the cost of a market basket of goods was $2,000. In 2016, the cost of the same market basket of goods was $2,100. Use the price index formula to calculate the price index for 2016 if 2014 is the base year.
- Suppose that in 2015, a typical U.S. student attending a state-supported college bought 10 textbooks at a price of $100 per book and enrolled in 25 credit hours of coursework at a price of $360 per credit hour. In 2016, the typical student continued to purchase 10 textbooks and enroll in 25 credit hours, but the price of a textbook rose to $110 per book and the tuition price increased to $400 per credit hour. The base year for computing a “student price index” using this information is 2015. What is the value of the student price index in 2015? In 2016? Show your work.
- What is the difference between gross private domestic investment and net private domestic investment? If you were to determine net domestic product (NDP) through the expenditures approach, which of these two measures of investment spending would be appropriate? Explain.
- Which of the following goods are usually intermediate goods and which are usually final goods: running shoes, cotton fibers, watches, textbooks, coal, sunscreen lotion, lumber?

Answer #1

Market Basket
2016
2017
Product
Quantity
Price
Price
Soda
365
$2.25
$2.30
Pizza
200
$10.00
$11.00
Chicken Wings
165
$7.00
$7.50
Room and Board
1
$10,000
$10,800
Textbooks
4
$150
$165
See table above. Suppose that the typical college student spend
money primarily on food, room and board, and books. Assume the base
year is 2016.
a) What is the cost of the basket in 2016?
b) What is the cost of the basket in 2017?
c) What is the...

We are calculating the Orr Price Index which consists of a
basket of goods that includes 4 pounds of apples, 3 pounds of
chicken, 2 cotton t-shirts, and 1 pair of blue jeans.
Prices in 2015: Apples are $1/pound; chicken is $5.00/pound;
cotton t-shirts are $15.00; and, blue jeans cost $25.00.
Prices in 2019: Apples cost $1.25 pound; chicken costs $4.50 per
pound; cotton t-shirts cost $18.00; and blue jeans cost $30.00.
Calculate the OrrPI for 2015, using 2015 as...

Discussion #6 – Consumer Price Index (CPI), Productivity and
standard of living.
The CPI is a measure of the overall cost of the goods and
services bought by a typical consumer and it is used to calculate
the rate of inflation. The government agency that is responsible
for calculating the CPI is the Bureau of Labor and Statistics. The
Bureau collects data and compares prices in more than 80,000 items
in major metropolitan areas of the U.S. A base year...

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