University of Southern California
Department of Economics
ECON 205 Principles of Macroeconomics
Spring 2007Prof. Safarzadeh
Assignment # 1
Answer Key
I General Topics: Fill in the blanks for the following questions.
1 The Banana Republic’s CPI (consumer price index) at the end
of year 2004 was 125.
At the end of year 2006 the republic’s CPI was 142.
The change in
Republic’s CPI from 2004 to 2006 is ___17____.
The average change in CPI is ___8.5_____.
The percentage change for the past two years is ___13.6%_____.
The average percentage
change for the past two years is _6.8% (6.58% geometric)_.
2

The Banana Republic’s CPI (consumer price index) at the end of year 2000 was 115.
At the
end of year 2003 the republic’s CPI was 106.
The change in Republic’s CPI from 2000 to 2003
is __9_____.
The average change in CPI is ___3_____.
The percentage change for the past
three years is _7.8% _______.
The average percentage change for the past three years is __
2.6% (2.67% geometric)____.
3
The relationship between price and quantity for a product is given as Q = 100  2P, where Q
is quantity and P is price.
a.
Graph the equation in question 3.
P
50
100
Q
b.
The variable Q in question 3 is called __dependent____ variable.
The variable P is called
independent___ variable.
The number 100 is called __intercept_____.
And the number 2 is
called __slope coefficient____.
c.
The relationship between Q ans P is a(n) __inverse_______ relation.
A $1 increase in P will
__decrease
____ Q by ______2______ units.
1
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