Question

207 5. Is the rate you calculated in the previous question above, below, or TABLE 1. US CPI-U YEAR CPI-U close to the Federal Reserve's target for inflation? 2005 195 2006 202 2007 6. Between what years, if any, was there deflation? 2008 215 2009 214 2010 218 2011 225 2012 230 7. Suppose that at in 2010 you bought a house for $300,000. Using the 2013 233 CPI, calculate what that would equal in 2019 dollars. 2014 237 2015 237 2016 240 2017 245 2018 8. Suppose that in 2015, you were hired at a job paying $40,000 per year, L 2019 256 and in 2019, your salary was $45,000. By what percent did your real income increased? 251

Answer 1

5. I do not know the rate calculated by you so i cant answer it

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6. Defaltion is the decrease in general price levels of goods and services.

So between the years 2008 and 2009 there is defaltion as CPI falls from 215 in 2008 to 214 in 2009

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7. In 2010 I bought a house for $300,000

What is its value in 2019?

CPI 2010 = 218 ; CPI2019= 256

Value of $300,000 in 2019 = Dollar Amount × (Beginning-period CPI / Ending-period CPI.)

= $ 300,000 * (218/256)

= $ 255,468.75

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8. In 2010 I was hired for a salary of $40,000 ; CPI 2015 = 237

In 2019 my salary is $ 45,000 ; CPI2019= 256

Real wage = (Nominal wage / CPI in that year ) * 100

Real Wage 2015 = (40,000/237) * 100 = 16,877. 637

Real Wage 2019 = (45,000/256) * 100 = 17,578.125

percentage increase in real income = [(17,578.125 - 16,877.637) / 16,877.637] * 100

= 4.15 %