Suppose 60 million people are employed, 14 million are unemployed, and 30 millio

Question

Suppose 60 million people are employed, 14 million are unemployed, and 30 million are not in the labor force. The civilian noninstitutional population equals ( answer) million people.

Consider the following hypothetical data, which are similar to those in Exhibit 1 in your textbook. Complete the following table by calculating both the current-year expenditures and the base-year expenditures. Current-Year Prices Current-Year Base-Year Prices Base-Year (Dollars) Expenditures (Dollars) (Dollars) Expenditures (Dollars) Market Basket 12 pens 7 shirts 5 pairs of shoes 0.20 28 32 10 On the basis of these prices, what is the Consumer Price Index (CPI) for the current year? 715.95 O 3.64 O 3.72 364.36

Explanation / Answer

Civilian noninstitutional population = Employed + Unemployed + Not in labor force

= 60 + 14 + 30

= 104 million.

Cost of basket = Price of good 1 x quantity of good1 +  Price of good 2 x quantity of good 2 +  Price of good 3 x quantity of good 3

Now current year expenditures are 12*1 = $12 for pens, 7*28 = $196 for shirts and 5*32 = $160 for shoes. Base year expenditures are 12*0.20 = $2.4 for pens, 7*7 = $49 for shirts and 5*10 = $50 for shoes

Cost of basket in current year = 12 + 196 + 160 = 368 and for the base year = 2.4 + 49 + 50 = 101.40

This implies the CPI = (368)*100/101.40 = 362.91. Closest option is 364..36

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