Question

Since 1980, the CPI has increased from 80.1 to 257.2 in 2020. In 1980, the average...

Since 1980, the CPI has increased from 80.1 to 257.2 in 2020. In 1980, the average US household spent $18,704 on all goods and services. Based on the increase in inflation, how much does a typical household spend in 2020?

Business   Finance   
0 0
Add a commentTranscribed image text
Next >

Homework Answers

Answer #1

INFLATION RATE PER YEAR = (CPI IN 2020/CPI IN 1980)^(1/20) - 1

INFLATION RATE PER YEAR = (257.2/80.1)^(1/20) - 1 = 2.959390%

Average household spent 18704 in 1980

So household spend in 2020 = 18704 x (1+ 0.02959390)^40 = 60058.29 [rounded to 2 decimals]

------------------

we can also calculate this amount directly

When CPI was 80.1, the average household spent 18704

Now if CPI is 257.2, the average household spend = 18704 x 257.2/80.1 = 60058.29 [rounded to 2 decimals]

-----------------

Answer : 60058.29

0 0
Know the answer?
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for?
Ask your own homework help question
Similar Questions
The measurement problems in the consumer price index (CPI) as an indicator of the cost of...
The measurement problems in the consumer price index (CPI) as an indicator of the cost of living are important because many government programs use the CPI to adjust for changes in the price level. Select one: True False Suppose that in 2016, the CPI for energy rose from 183.4 to 193.3 while the CPI for all items rose from 236.5 to 241.4. As a result the inflation rate for energy is lower than the overall inflation rate in 2016. Select...
1) In 1991, the CPI was 131.1 and in 1997 the CPI was 158.2. What was...
1) In 1991, the CPI was 131.1 and in 1997 the CPI was 158.2. What was the rate of inflation over this period of time? Select one: a. 27.1 percent. b. 31.1 percent. c. 16.5 percent. d. 20.7 percent. e. 17.1 percent. 2) Cost-push inflation is due to: Select one: a. "too much money chasing too few goods." b. the economy operating at less than full employment. c. increases in production costs. d. all of the above. 3) Nominal gross...
9. The CPI-U (U.S. city average, all items) has the following annual averages: YEAR INDEX 2006...
9. The CPI-U (U.S. city average, all items) has the following annual averages: YEAR INDEX 2006 201.600 2007 207.342 2008 215.303 2009 214.537 2010 218.056 a. For each year from 2007 to 2010, determine the annual inflation rate in percent to three decimal places. b. Since inflation, like interest, is compounded from period to period (e.g., year to year), estimate the overall annual inflation rate per year from 2006 to 2010. Suggestion: Do not simply average the rates of Part...
1. Which of the following statements is (are) correct? (x) The term “inflation” is used to...
1. Which of the following statements is (are) correct? (x) The term “inflation” is used to describe a situation in which the overall level of prices in the economy is increasing and deflation occurs if the price level is decreasing. (y) The inflation rate is calculated as the percentage change in the price level from the previous period. (z) If inflation occurs, the typical household will spend more dollars to maintain the same standard of living. A. (x), (y) and...
1) A university wants to know if the average salary of its graduates has increased since...
1) A university wants to know if the average salary of its graduates has increased since 2015. The average salary of graduates prior to 2015 was $48,000. Since 2015, the university surveyed 256 graduates and found an average salary of $48,750. Assume that the standard deviation of all graduates' salaries is $7,000. b. Calculate the value of the test statistic and the p-value at a 5% significance level. c. At the 5% significance level, can you conclude that salaries, on...
The Danish krone changes from A$0.7877 each at the start of 2020 to A$0.8027 each at...
The Danish krone changes from A$0.7877 each at the start of 2020 to A$0.8027 each at the end of 2020. Over that same year, inflation in the prices of all goods and services in Denmark is 7.3%, whereas in Australia it is 3.9%. What is the amount of real decrease (-) or real increase (+) that the Danish krone experiences against the Australian dollar during 2020?
The CPI-U (U.S. city average, all items) has the following annual averages: Year Index 2013 237.3...
The CPI-U (U.S. city average, all items) has the following annual averages: Year Index 2013 237.3 2014 239.6 2015 242.8 2016 243.8 2017 248.4 Part a For each year from 2014 to 2017, determine the annual inflation rate in percent to two decimal places. Year Inflation Rate 2014 enter percentages % 2015 enter percentages % 2016 enter percentages % 2017 enter percentages % Part b Since inflation, like interest, is compounded from period (e.g. year to year), estimate the overall...
3a. Suppose that a household has an income elasticity of demand for video games of 3.0....
3a. Suppose that a household has an income elasticity of demand for video games of 3.0. If the household experiences an income increase from $40,000 to $60,000 per year, how would consumption of video games change for this household? What does this tell us about how this household classifies video games? 3b. Suppose that a household has an income elasticity of demand of -1 for ramen noodles and the household currently consumes 105 boxes of ramen per year. If the...
Which of the following describe the consumer price index (CPI)? It: compares the cost of the...
Which of the following describe the consumer price index (CPI)? It: compares the cost of the typical basket of goods consumed in period 1 to the cost of a basket of goods typically consumed in period 2. compares the cost in the current period to the cost in a reference base period of a basket of goods typically consumed in the base period. measures the increase in the prices of the goods included in GDP. is the ratio of the...
Investments in the stock market have increased at an average compound rate of about 5% since...
Investments in the stock market have increased at an average compound rate of about 5% since 1903. It is now 2012. a. If you invested $1,000 in the stock market in 1903, how much would that investment be worth today? (Do not round intermediate calculations. Round your answer to 2 decimal places.)   Investment $    b. If your investment in 1903 has grown to $1 million, how much did you invest in 1903? (Do not round intermediate calculations. Round your answer...
ADVERTISEMENT
Need Online Homework Help?

Get Answers For Free
Most questions answered within 1 hours.

Ask a Question
ADVERTISEMENT