Principles of Macroeconomics 6th Edition solutions

Principles of Macroeconomics 6
Which do you think has a greater effect on the consumer price index: a 10 percent increase in the price of chicken or a 10 percent increase in the price of caviar? Why?

Principles of Macroeconomics 6
Describe the three problems that make the consumer price index an imperfect measure of the cost of living.

Principles of Macroeconomics 6
If the price of a Navy submarine rises, is the consumer price index or the GDP deflator affected more? Why?

Principles of Macroeconomics 6
Over a long period of time, the price of a candy bar rose from $0.10 to $0.60. Over the same period, the consumer price index rose from 150 to 300. Adjusted for overall inflation, how much did the price of the candy bar change?

Principles of Macroeconomics 6
Explain the meaning of nominal interest rate and real interest rate. How are they related?

Principles of Macroeconomics 6
Which of the problems in the construction of the CPI might be illustrated by each of the following situations? Explain. a. the invention of the iPod b. the introduction of air bags in cars c. increased personal computer purchases in response to a decline in their price d. more scoops of raisins in ea

Principles of Macroeconomics 6
The New York Times cost $0.15 in 1970 and $2.00 in 2009. The average wage in manufacturing was $3.23 per hour in 1970 and $20.42 in 2009. a. By what percentage did the price of a newspaper rise? b. By what percentage did the wage rise? c. In each year, how many minutes does a worker have to work to e

Principles of Macroeconomics 6
The chapter explains that Social Security benefits are increased each year in proportion to the increase in the CPI, even though most economists believe that the CPI overstates actual inflation. a. If the elderly consume the same market basket as other people, does Social Security provide the elderly

Principles of Macroeconomics 6
When deciding how much of their income to save for retirement, should workers consider the real or the nominal interest rate that their savings will earn? Explain.

Principles of Macroeconomics 6
Suppose that a borrower and a lender agree on the nominal interest rate to be paid on a loan. Then inflation turns out to be higher than they both expected. a. Is the real interest rate on this loan higher or lower than expected? b. Does the lender gain or lose from this unexpectedly high inflation?