Question

In this question we will compare how much money the movies “Avatar”, “Titanic”
and “Gone with the Wind”. Avatar, which came out in 2009 made $2.788 billion
dollars; Titanic, which came out in 1997, made $2.186 billion and Gone with
the Wind, which came out in 1939, made $0.199 billion. These numbers are all
in nominal terms.
a) Find the CPI in 1939 and 1997 with 2009 as the base year. Hint: to do this
find the CPI on the Statistics Canada website (a simple google search will
bring you there). Also, not that the CPI in the statistics Canada website
will not necessarily have 2009 as the base year, so you need to translate
the CPI from the Statistics Canada base year to 2009 as the base year.
b) Calculate inflation from 1997 to 2009 and from 1939 to 2009.
c) What did each film make in real terms with 2009 as the base year, i.e.,
how much did each film make in terms of 2009 dollars.

PLEASE COMPLETE ALL 3 PARTS!

Answer 1

(a) The CPI index in 1939, 1997 and 2009 are respectively 7.7, 90.4 and 114.4 (base year is 2002). That is the CPI index for base year 2002 = 100. These CPI indices have been converted to 2009 base year. The formula to translate into 2009 base year = CPI index * 100 / CPI index of 2009. For example, the new CPI index for 2009 = 114.4*100/114.4 = 100. The new index for 1997 = 90.4 * 100 / 114.4 = 79.02. Similarly, the new index for 1939 = 7.7 * 100 / 114.4 = 6.73. The calculation can be found in the table below.

(b) The inflation is calculated as the % change in CPI. For example, inflation from 1997 to 2009 = (CPI₂₀₀₉ - CPI₁₉₉₇)/CPI₁₉₉₇ = (100-79.02)/79.02 = 27%. Similarly, the inflation from 1939 to 2009 = (CPI₂₀₀₉ - CPI₁₉₃₉)/CPI₁₉₃₉ = (100-6.73)/6.73 = 1386%. These calculations are shown in the table

(c) Real earning of Gone with the Wind (base year = 2009) = 0.199 * 100/6.73 = $2.957 billion

Real earning of Gone with the WindTitanic (base year = 2009) = 90.4 * 100/79.02 = $2.766 billion

Real earning of Avatar is equivalent to its nominal earning of $2.788 billion since 2009 is used as base year.

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The calculated table is as follows:

The formula view of the spreadsheet is as follows: