Use the information provided in the textbook appendix on the consumer price inde

Question

Use the information provided in the textbook appendix on the consumer price index, to answer the following questions. If you do not have a physical copy of the textbook, you can use the CPI data that are posted on Canvas in a folder named CPI Data. Use the data in the last column of the table with the column heading, Annual. Show relevant calculations. The CPI in 1990 was 130.7 What does this number mean? Calculate the annual rates of inflation for 1980 and 2014 Calculate the overall rate of inflation for the decade of the 1980's(1980 to 1989)? When Mr. Chips began his teaching career in 1960, his salary was $ 10, 000. per year. At his retirement party in 2004. Mr. Chips was euphoric that during his long teaching career his salary had increased six-fold to $60, 000. Was Mr. Chips' euphoria about his six-fold salary increase justified? In 2010 Charlene bought a new car for $20, 000. using a 5 year car loan that had a fixed nominal interest rate of 10%. What was the real interest rate on this loan in 2011? What was the percentage increase in social security benefits received by senior citizens in the year 2013? Was this increase fair compensation for the increase in the cost of living experienced by senior citizens? On average how many times higher were prices in 2005 compared to 1985?

Explanation / Answer

Please provide tha appendix here also, you just took the picture of the question and not the relevant information that was useful in answering the question.

I can answer only first part for your question.

Suppose we have some base year as given, say 1980. So in base year we take CPI=100. In 1990, CPI is 130.7. That means that the consumer basket which was costing 100 in year 1980, now the same basket, with same quantity cost 130.7 in 1990. So from 1980 to 1990, the price of goods and services has increased by 30.7%, which is nothing but the inflation rate in the economy between the period 1980 and period 1990.

(ii) Annual rates for inflation for period 1980 and 2014 can be calculated as simply the Difference of CPI in 1980 and 1979 / Base CPI in 1979 and thus multiplied by 100. So what we get is inflation rate, please note that i have taken 1979 as base for 1980 inflation and 2013 as base for 2014 inflation. But as per requirement you can alter the things, formula and procedure remains the same.

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