Assignment: Principles Of Economics

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Principles of Economics-Macro Dr. Chen 3/25/2013 Third Assignment Chapter 23, CPI Page 607 3. The people on Coral Island buy only juice and cloth. The CPI market basket contains the quantities bought in 2010. The average household spent $60 on juice and $30 on cloth in 2010 when the price of juice was $2 a bottle and the price of cloth was $5 a yard. In the current year, 2011 juice is $4 a bottle and cloth is $6 a yard. Calculate the CPI and the inflation rate in 2011. Quantity of Juice = 30 Quantity of Cloth = 6 Cost of CPI market basket at base period price: 60+30 = $90 Cost of CPI market basket at current period price: (30 x 4)+(6 x 6) = $156 CPI for 2010: 90/90 x 100 = 100 Answer: CPI for 2011: 156/90 x 100 = $173.33…show more content…
In 1988, the average wage rate was $9.45 an hour and in 2008 the average wage rate was $18.00 an hour. The CPI in 1988 was 118.3 and in 2008 it was 215.3. Which real wage rate is higher? Real Wage Rate in 1988: $9.45/118.3 x 100 = $7.99 Real Wage Rate in 2008: $18.00/215.3 x 100 = $8.36 Answer: The Real Wage Rate in 2008 was higher than the Real Wage Rate in 1988. Chapter 24 Potential GDP Page 631 7. What is the quantity of labor employed, potential GDP, and the real wage rate, and total labor income? Table 2 Labor Market | Real Wage Rate (dollars per hour) | Quantity of labor demanded | Quantity of labor supplied | 1.00 | 10 | 50 | 0.80 | 20 | 40 | 0.60 | 30 | 30 | 0.40 | 40 | 20 | Table 1 Production Function

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