How does the Consumer Price Index differ from the GDP deflator? Explain what is meant by...
- How does the Consumer Price Index differ from the GDP deflator?
- Explain what is meant by the "substitution bias" in the CPI.
- If food prices increase by 10%, and people always spend 25% of their total consumption expenditure on food, how much will the CPI increase (all other prices stay the same)?
Homework Answers
a. GDP deflator only includes domestic goods and does not include any imported goods. But the CPI includes imported goods i.e, any goods purchased from abroad. GDP deflator is a measure of the prices of all goods and services while CPI is a measure of all goods and services bought by the consumers . These points differentiate GDP from CPI .
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How does the Consumer Price Index differ from the GDP
deflator?
Explain what is meant by...
Suppose the price of thes e respond by bumer e The consumer price reflects this price...
Suppose the price of thes e respond by bumer e The consumer price reflects this price increase accurately understates the price increase due to the so-called income bus overstates the price increase due to the so-called incomebas overstates the price increase due to the so-called substitution bias QUESTION 15 Laura bought word processing software in 2005 for 550. Laura's twin brother, Laurence, buys an upgrade of the same software in 2006 for $50. What problem in the construction of the...
What is a converging economy? Match each description with the proper term. Consumer price index (CPI)...
What is a converging economy? Match each description with the proper term. Consumer price index (CPI) Producer price index (PPI) Personal consumption expenditure (PCE) Gross domestic product deflator (GDP Deflator)
If food prices increase by 10%, and people always spend 25% of their total consumption expenditure...
If food prices increase by 10%, and people always spend 25% of their total consumption expenditure on food, how much will the CPI increase (all other prices stay the same)? (No handwritings answer, please. I can't read most of the handwriting. In text/typing/word format would be great). Thanks
ASSIGNMENT #5 9. One way the consumer price index (CPI) differs from the GDP chain price...
ASSIGNMENT #5 9. One way the consumer price index (CPI) differs from the GDP chain price index is that the CPI: uses current year quantities of goods and services b. a. includes separate market baskets of goods and services for both base and current years. includes only goods and services bought by typical urban consumers. d. C. is bias free. 10. Suppose a market basket of goods and services costs $1,000 in the base year and the consumer price index...
The broadest-based price index available is the A) GDP deflator. B) producer price index. C) consumer price index....
The broadest-based price index available is the A) GDP deflator. B) producer price index. C) consumer price index. D) wholesale price index. The MPC is A) the change in consumption divided by the change in income. B) consumption divided by income. C) the change in consumption divided by the change in saving. D) the change in saving divided by the change in income. The MPS is A) the change in saving divided by the change in income. B) 1 +...
1. Explain briefly what the consumer price index is trying to measure and how it is...
1. Explain briefly what the consumer price index is trying to measure and how it is constructed. 2. Henry Ford paid his workers $5 a day in 1914. If the U.S. consumer price index was 10 in 1914 and 195 in 2005, how much is the Ford daily paycheque worth in 2005 dollars? 3. Describe the three problems that make the consumer price index an imperfect measure of the cost of living. 4. If the price of a military aircraft...
d. leaves both the GDP deflator and the consumer price index unchanged. 23. In a closed...
d. leaves both the GDP deflator and the consumer price index unchanged. 23. In a closed economy, national saving is a. usually greater than investment. b. equal to investment. d. usually less than investment because of the leakage of taxes. c. always less than investment.
Question 12 0.25 pts 12. Changes in the producer price index tend to ___changes in actual...
Question 12 0.25 pts 12. Changes in the producer price index tend to ___changes in actual producer costs. O a. overstate b. understate O c lag behind d. precede Question 13 0.25 pts 13. Trends over the last 70 years for the consumer price index (CPI), producer price index (PPI), and gross domestic product (GDP) deflator show that: a. They exhibit identical patterns. b. They have changed in similar but not identical patterns. c. The GDP deflator has shown considerably...
What is the Consumer Price Index (CPI) and how is it determined each month? How does...
What is the Consumer Price Index (CPI) and how is it determined each month? How does the Bureau of Labor Statistics (BLS) calculate the rate of inflation from one year to the next? What effect does inflation have on the purchasing power of a dollar? How does it explain differences between nominal and real interest rates? How does deflation differ from inflation? (Answer in your own words)
3. What does the consumer price index measure? List three ways in which it differs from...
3. What does the consumer price index measure? List three ways in which it differs from the GDP deflator
Suppose the price of thes e respond by bumer e The consumer price reflects this price increase accurately understates the price increase due to the so-called income bus overstates the price increase due to the so-called incomebas overstates the price increase due to the so-called substitution bias QUESTION 15 Laura bought word processing software in 2005 for 550. Laura's twin brother, Laurence, buys an upgrade of the same software in 2006 for $50. What problem in the construction of the...
What is a converging economy? Match each description with the proper term. Consumer price index (CPI) Producer price index (PPI) Personal consumption expenditure (PCE) Gross domestic product deflator (GDP Deflator)
ASSIGNMENT #5 9. One way the consumer price index (CPI) differs from the GDP chain price index is that the CPI: uses current year quantities of goods and services b. a. includes separate market baskets of goods and services for both base and current years. includes only goods and services bought by typical urban consumers. d. C. is bias free. 10. Suppose a market basket of goods and services costs $1,000 in the base year and the consumer price index...
The broadest-based price index available is the A) GDP deflator. B) producer price index. C) consumer price index. D) wholesale price index. The MPC is A) the change in consumption divided by the change in income. B) consumption divided by income. C) the change in consumption divided by the change in saving. D) the change in saving divided by the change in income. The MPS is A) the change in saving divided by the change in income. B) 1 +...
d. leaves both the GDP deflator and the consumer price index unchanged. 23. In a closed economy, national saving is a. usually greater than investment. b. equal to investment. d. usually less than investment because of the leakage of taxes. c. always less than investment.
Question 12 0.25 pts 12. Changes in the producer price index tend to ___changes in actual producer costs. O a. overstate b. understate O c lag behind d. precede Question 13 0.25 pts 13. Trends over the last 70 years for the consumer price index (CPI), producer price index (PPI), and gross domestic product (GDP) deflator show that: a. They exhibit identical patterns. b. They have changed in similar but not identical patterns. c. The GDP deflator has shown considerably...
3. What does the consumer price index measure? List three ways in which it differs from the GDP deflator
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