Year Resident Tuition Consumer Price Index 1980 $350 92.4 2018 $4,570 245.300 16
ID: 1137773 • Letter: Y
Question
Year Resident Tuition Consumer Price Index 1980 $350 92.4 2018 $4,570 245.300 16) What is the cumulative inflation rate between 1980 and 2018? A) 165% C) 1,206% B) 39290 D) none of the above 17) What is the nominal increase in tuition between 1980 and 2018 A) 165% C) none of the above D) 1.206% B) 392% 18) What is the real increase in tuition between 1980 and 2018? A) 39290 C) none of the above D) 165% 18) B) 1,206% 19) What is the real 1980 tuition in 2018 dollars 19) A) S4..570 C) S929 D) none of the above B) S1,863Explanation / Answer
(16) (A)
Cumulative inflation rate = % Change in CPI = (245.3 / 92.4) - 1 = 2.65 - 1 = 1.65 = 165%
(17) (D)
Nominal increase in tuition = ($4,570 / $350) - 1 = 13.06 - 1 = 12.06 = 1,206%
(18) (C)
Real increase in tuition = Nominal increase in tuition - Inflation rate = 1,206% - 165% = 1,041%
(19) (C)
Required Real tuition = Nominal tuition, 1980 x (CPI, 2018 / CPI, 1980) = $350 x (245.3 / 92.4) = 929
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