Chapter Questions
Which do you think has a greater effect on the consumer price index: a 10 percent increase in the price of chicken or a 10 percent increase in the price of caviar? Why?
Describe the three problems that make the consumer price index an imperfect measure of the cost of living.
If the price of a Navy submarine rises, is the consumer price index or the GDP deflator affected more? Why?
Over a long period of time, the price of a candy bar rose from $$\$ 0.10$$ to $$\$ 0.60$$. Over the same period, the consumer price index rose from 150 to 300 . Adjusted for overall inflation, how much did the price of the candy bar change?
Explain the meaning of nominal interest rate and real interest rate. How are they related?