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Chapter 9: Q 12. (page 243)
Why do economists use index numbers to measure
the price level rather than the dollar value of goods?
Because of simplicity may be.
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Given the federal budget deficit in recent years,
some economists have argued that by adjusting Social Security payments for inflation using the CPI, Social Security is overpaying recipients. What is their argument, and do you agree or disagree with it?
The index number representing the price level changes from 110 to 115 in one year, and then from 115 to 120 the next year. Since the index number increases by five each year, is five the inflation rate each year? Is the inflation rate the same each year? Explain your answer.
Why do you think the U.S. experience with inflation over the last years has been so much milder than in many other countries?
How should an increase in inflation affect the interest rate on an adjustable-rate mortgage?
The total price of purchasing a basket of goods in the United Kingdom over four years is year , year , year , and year . Calculate two price indices, one using year as the base year (set equal to ) and the other using year as the base year (set equal to ). Then, calculate the inflation rate based on the first price index. If you had used the other price index, would you get a different inflation rate? If you are unsure, do the calculation and find out.
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