A senator gives a speech where he attacks payments to seniorcitizens. He claims

Question

A senator gives a speech where he attacks payments to seniorcitizens. He claims that payments increased by 50% per person from1980 to 1990. Another senator gives a speech about health-carespending. She claims that per-capita health expenditures have risenby 25% from 1985 to 1990. Assume that both senators are talkingabout nominal amounts, use the following GDP price deflator figures(1980--71.7, 1985--94.4, 1990--113.2) to determine whether realspending levels have increased. Do you think that the senatorswould choose to report the real or nominal figures?
Any help or hints would be greatly appreciated! Thanks!
Any help or hints would be greatly appreciated! Thanks!

Explanation / Answer

Inflation from 1980 - 1990 (113.2 - 71.7) /71.7 *100% = 57.88% This means that the payment is actually decrease after consideringthe affect of inflation. Inflation from 1985-1990 (113.2 - 94.4) /94.4 *100% = 19.92% The health expenditure is actually increase. Senators will usually report the nominal figures. They can enlargethe effect of increasing in cost by nominal figures.

Related Questions

Navigate

• Browse (All)
• Browse A
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.