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
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Answer #2

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

answered by: anonymous
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