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Unformatted text preview: ring Price Changes and the Unemployment Rate 301 11 (286-309) EMC Chap 11 11/17/05 6:06 PM Page 302 units of a good. A person who is able to
buy less today than in 1989 is worse off.
This situation happens when one’s
income rises by less than prices rise. QUESTION: If what cost $1 when I was born now costs $1.61, does that mean I
am worse off today than someone in
1989? It would seem so—after all I have
to pay $1.61 for the same thing that
someone in 1989 paid $1 for. The CPI is calculated by the U.S. Bureau
of Labor Statistics. The bureau uses a sampling of thousands of households and determines what these consumers paid for a
representative group of goods called the
market basket. This amount is compared
with what a typical “consumer unit” paid
for the same market basket in 1982–1984. (A
consumer unit is a household of related or
unrelated individuals who pool their money.
In the last survey, the average consumer unit
was made up of 2.6 people.) ANSWER: Prices are higher today than they were in 1989, but incomes are
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This document was uploaded on 01/16/2014.
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