Question

Question 5 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.

Answer 1

To calculate CPI we have to divide the overall price of the basket of goods in any given year by the same basket size in the base year. Then we multiply this number by 100. In this way we can find CPI with any given base year.

so we have

cost of money made by movie " gone with the wind" in 1939 = $0.199 billion

cost of money made by movie "Titenic" in 1997 = 2.186 billion

and the cost of money made by movie "Avtar" in 2009 =$2.788 billion

CPI in year 1939 with base year 2009 would be = ($0.199/$2.788)*100

=7.137 (approx.)

CPI in year 1997 with base year 2009 would be =( $2.186/$2.788)*100

=78.407(approx.)

b) ans- Inflation is the percentage change in CPI b/w two given years

CPI in 2009 = ($2.788/$2.788.)*100

=100

so the inflation from year 1997 to year 2009 would be =( 78.407-100)/100

= -21.593%

and the inflation from year 1939 to year 2009 would be = (7.137-100)/100

= -0.928%

c) we can conclude from above inflation rate that each film maker increses investment in film making .it shows that inflation which is a quantitive measure of the rate at which the average price level of goods and services in economy increses over a period of time .often expressed as a percentage ,inflation indicates a decrease in the purchasing power of nations currency.