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Chapter 7: Q.9 (page 162)

Suppose that in 2017, a typical U.S. student attending a state-supported college bought 10 textbooks at a price of 100\( per book and enrolled in 25 credit hours of coursework at a price of 360\) per credit hour. In 2018, the typical student continued to purchase 10 textbooks and enrol in 25 credit hours, but the price of a textbook rose to 110\( per book, and the tuition price increased to 400\) per credit hour. The base year for computing a "student price index" using this information is 2017. What is the value of the student price index in 2017? In 2018? Show your work.

Short Answer

Expert verified

The value of the student price index in 2017is 100and in 2018is111

Step by step solution

01

introduction

The price index estimates the general change in the price of a market container of labour and products throughout some undefined time frame.

cost of market basket = market basket quantity×price per unit

=(100×10)+(360×25)=1000+9000=10000

The value of the student price index in 2017,

=cost of market basket of2017cost of market basket of base year×100=1000010000×100=100

02

explanation

The value of the student price index in 2018,

cost of market basket = market basket quantity×price per unit

localid="1651579183569" =(110×10)+(400×25)=1100+10000=11100

=cost of market basket of2018cost of market basket of base year×100=1110010000×100=111

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Most popular questions from this chapter

Describe how price indexes are calculated and define the key types of price indexes

Suppose that the U.S. nonmilitary, noninstitutionalized adult population is 254 million, the number employed is 156 million, and the number unemployed is 8 million.

a. What is the unemployment rate?

b. Suppose there is a difference of 60 million between the adult population and the combined total of people who are employed and unemployed. How do we classify these 60 million people? Based on these figures, what is the U.S. labour force participation rate?

Suppose that in Figure 7-2, the number of people employed was to expand by 9.2 million, and the number of people unemployed was to rise by 7.1 million. What would be the new values of the labour force and of the unemployment rate?

This year's value of the economy's price index is 100, and people anticipate that next year's value will be 103. The current nominal interest rate is 5 per cent. What is the real interest rate?

During the course of a year, the labour force consists of the same 1,000 people. Employers have chosen not to hire 20 of these people in the face of government regulations making it too costly to employ them. Hence, they remain unemployed throughout the year. At the same time, every month during the year, 30 different people become unemployed, and 30 other different people who were unemployed find jobs.

a. What is the frictional unemployment rate?

b. What is the unemployment rate?

c. Suppose that a system of unemployment compensation is established. Each month, 30 new people (not including the 20 that employers have chosen not to employ) continue to become unemployed, but each monthly group of newly unemployed now takes two months to find a job. After this change, what is the frictional unemployment rate?

d. After the change discussed in part (c), what is the unemployment rate?
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