Economics_Ch11

# Now we divide the total current year expenditure 180

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Unformatted text preview: was spent on CDs and \$30 was spent on T-shirts, for a total dollar expenditure of \$180. Now, we divide the total current-year expenditure, \$180, by the total base-year expenditure, \$150, and then multiply by 100: \$180/\$150 100 120 The CPI for the current year is 120. Notice that the CPI is just a number. What does this number tell us? By itself, the CPI number tells us little. It is only when we compare one CPI number with another that 2001 2002 2003 2004 we learn something. (See Exhibit 11-9.) For example, in the United States in 2003, the CPI was 184.0. One year later, in 2004, the CPI was 188.9. The two CPI numbers can be used to figure out the percentage by which prices increased between 2003 and 2004 in the same way we determined the percentage increase for a single price: Percentage change in CPI CPIlater year CPIearlier year 100 CPIearlier year If we fill in the numbers, we get the following: Percentage change in CPI 188.9 184.0 184.0 100 2.66% Determining the Quantity of Goods and Services and the Price Level Chapter 4 explaine...
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## This document was uploaded on 01/16/2014.

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