Unformatted text preview: 1. Calculating inﬂation using a simple prioe index Consider a national pnoe Index, the UnluersItv Student PrIce Index (USPI), based upon a survey of annual purchases
of a typical university student. Suppose the table below shows Information on the market basket for the USPI and the once: Dream of the goods In zoos, 2007, and zoos. Quantity 2006 2007 1000
In Basket Price Cost of HIM Prim cost of Basket Prim cost of Basket
Notebooks 10 $3 $30 $3 $30 $4 $40 \/
Calculators 1 $75 $75 $80 $80 $104 $104 1’
Large Coffees 300 $2 $600 $2 $600 $2 $600 \I
HighCaffeine 75 $2 $150 $4 $300 $5 $375 ‘4'
Galas
Textbooks B $90 $720 $110 $880 $120 $960 \I
Total Cost $1,575 $1,690 $2,079 \I
Price Index 100 120 132 J
The cost of each Itierh In the basket, and the total cost of the basket, Is shown for 2006. Pelform these same
calculations for 2007 and 2008, and enter the results In the table
Explanation: Dpln v
Suppose the base year for this price index is 2006. Calculate and enter the value ofthe USPI In all three years In the
last row of the table.
Explanation: on" v
Between 2006 and 2007, the USPI Increased by 20% if . Between 2007 and 2003, me USPI increased by
w 
Explanation: Dpln v Which of the followingr If true, would illustrate why pnoe Indexes such as the USPI rnlght overstate Inﬂation In the
cost of goIng to university? Check all that apply, v' x As the prioe of texmooks Increased. more and more students turned to the usedbook market or chose not to buy textbooks at all, instead using the copies on reserve In the library. ‘4' Professors required students to buy 10 notebooks each, regardless of the once. v‘ x The quality and design of calculators improved dramatically from 2005 to 2008, For example. calculators made
In 2008 accept memory cards, while those made in 2005 do not. Explanation: Dpln v Points; 8 l2 ‘2 Average: 1M1“: J‘plia QNII 2 5.2 tr. mm gum Malia 1n: All rigi'lslasen'zd, Copyright Q 20012009 AQIIE All rights reserved. Terms and Conditions  Privacy Notice  Security Notice  Supﬂrt ]
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 Fall '08
 HannahHolmes
 Economics

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