Question

# Suppose that the following table shows the average retail price of butter​ (the price of​ salted,...

Suppose that the following table shows the average retail price of butter​ (the price of​ salted, grade AA butter per​ pound) and the Consumer Price Index​ (CPI) from 1980 to​ 2010, scaled so that the CPI​ = 100 in 1980.

 1980 1990 2000 2010 CPI 100.00100.00 158.56158.56 208.98208.98 218.06218.06 Retail price of butter 1.961.96 1.861.86 2.352.35 2.992.99

Calculate the real price of butter in 1980 dollars.  ​(Enter your responses rounded to two decimal places in the table​ below.)

 1980 1990 2000 2010 Real price of butter nothing nothing nothing nothing

Real price of butter in year 1980 = [CPI 1980 / CPI 1980 ]* nominal price of butter in year 1980

= [100/100]*1.96

= \$1.96

Real price of butter in year 1990 = [CPI 1980 / CPI 1990 ]* nominal price of butter in year 1990

= [100/ 158.56]*1.86

= \$1.17

Real price of butter in year 2000 = [CPI 1980 / CPI 2000 ]* nominal price of butter in year 2000

= [100/ 208.98]*2.35

= \$1.12

Real price of butter in year 2010 = [CPI 1980 / CPI 2010 ]* nominal price of butter in year 2010

= [100/ 218.06]*2.99

= \$1.37

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