CPI | Exercise

Exercise - CPI

1. The price of a taco was $0.29 in 1970 and $1.09 in 2000.  

The CPI was 38.8 in 1970 and 172.2 in 2000.  

The 2000 price of a taco in 1970 dollars is _________

2. When 1983 is the CPI base year, the CPI value is 82.4 for 1980 and 172.2 for 2000.  

Suppose we want to convert this CPI series to have a base year of 2000 (that is, CPI2000 = 100).  

What is the value of the revised CPI for 1980?

3. The CPI in 1970 was 38.8 and in 1998 the CPI was 163.0.  
If the real value of a 1970 gallon of milk in terms of 1998 dollars is $0.70, 

what was the nominal price of milk in 1970?

4. The nominal price of a 1990 laptop was $3,500 and the CPI that year was 130.7.  
The nominal price of a laptop in 2010 was $600 and the CPI that year was 218.1.  

What is the real price of a 2010 laptop in terms of 1990 dollars?  By what percent has the real price of laptops changed?

5. The price to attend a NBA basketball game in Chicago is $55 while the CPI in Chicago is 153.  
The CPI in Charlotte is 108 while the price to attend a NBA basketball game is $52.  

Which city offers a smaller real cost of attending a NBA basketball game?

ANSWER

1. The price of a taco was $0.29 in 1970 and $1.09 in 2000.  

The CPI was 38.8 in 1970 and 172.2 in 2000.  

The 2000 price of a taco in 1970 dollars is $0.29

2. When 1983 is the CPI base year, the CPI value is 82.4 for 1980 and 172.2 for 2000.  

Suppose we want to convert this CPI series to have a base year of 2000 (that is, CPI2000 = 100).  

What is the value of the revised CPI for 1980? 47.9

3. The CPI in 1970 was 38.8 and in 1998 the CPI was 163.0.  If the real value of a 1970 gallon of milk in terms of 1998 dollars is $0.70, what was the nominal price of milk in 1970?  38.8($0.70)/163 = $0.17 

4. The nominal price of a 1990 laptop was $3,500 and the CPI that year was 130.7.  The nominal price of a laptop in 2010 was $600 and the CPI that year was 218.1.  What is the real price of a 2010 laptop in terms of 1990 dollars?  By what percent has the real price of laptops changed?

a. 130.7($600)/218.1 = $360  

b. -(360 - 3500)/3500 x 100% = 89.71%

5. The price to attend a NBA basketball game in Chicago is $55 while the CPI in Chicago is 153.  The CPI in Charlotte is 108 while the price to attend a NBA basketball game is $52.  Which city offers a smaller real cost of attending a NBA basketball game?

Chicago real value [NBA(Charlotte)] = 153(52)/108 = $73.67. The real value of a game in Charlotte exceeds the real value of a game in Chicago.  Chicago offers a smaller real cost of attending a game.