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AACSB: Application of knowledge 162) Looking at the following table, what is the rate of growth of the average price level from 2011 to 2012? Year Nominal Average Hourly Earnings, $ CPI (2010 = 100) 2010 10 100 2011 10 105 2012 12 110 A) 1.52 per cent B) 2.0 per cent C) 3.5 per cent D) 4.76 per cent Answer: D Diff: 2 A-Head 13.6: Using Price Indexes to Adjust for the Effects of Inflation AACSB: Application of knowledge 163) If the anticipated rate of inflation is 5 per cent and workers agree to a wage increase of 4 per cent, if the anticipated rate occurs, then nominal wages will B
Diff: 3 A-Head 13.6: Using Price Indexes to Adjust for the Effects of Inflation AACSB: Application of knowledge TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false. 164) To calculate real wages in Year 1, it is correct to divide nominal wages in Year 1 by the CPI in year 1, and multiply the resultant figure by 100. Answer: TrueFalse Diff: 1 A-Head 13.6: Using Price Indexes to Adjust for the Effects of Inflation AACSB: Analytic thinking 165) Assume that the CPI in 2014 was 217, while the CPI in 1986 was 82. If a person had $5000 in 1986, its equivalent purchasing power in 2014 would be $10 850. Diff: 3 A-Head 13.6: Using Price Indexes to Adjust for the Effects of Inflation AACSB: Application of knowledge ESSAY. Write your answer in the space provided or on a separate sheet of paper. 166) Using the following table, calculate real average hourly earnings for 2012, 2013 and 2014. Calculate the rate of growth of real average hourly earnings from 2013 to 2014. Year Nominal Average Hourly Earnings, $ CPI (2012 = 100) 2012 10 100 2013 11 105 2014 12 110 Diff: 3