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1. Refer to the table of CPIs. Calculate the inflation rate for each of the following periods.
a. 1970 1979

b. 1980 1989

c. 1990 1999

d. 2000 - 2009

e. How does the inflation rate compare across the decades?




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2. The following table contains the Consumer Price Index for the Denver area.
Year
2005
2006
2007
2008
2009
CPI
190.9
197.7
202.029
209.903
208.548
a. Calculate the inflation rate between 2008 and 2009.

b. The inflation rate for the US as a whole between 2008 and 2009 was 0.1%. How did inflation in the
Denver area compare to the national inflation rate?

3. The nation of Vegopia produces cauliflower, broccoli and carrots. In 2008, 100 heads of cauliflower
are produced and priced at $2 each, 50 bunches of broccoli for $1.50 each, and 500 carrots at $0.10
each. In 2009, they produce 75 heads of cauliflower for $3 each, 80 bunches of broccoli for $1.50 each
and 500 carrots for $0.20 each. The typical household in Vegopia purchases 5 cauliflowers, 3 broccolis
and 50 bunches of carrots.
a. Calculate the cost of the basket in 2008.

b. Calculate the cost of the basket in 2009.

c. If the base year is 2008, calculate the CPIs for 2008 and for 2009.

4. Which of the known problems with the CPI might be illustrated with each of the following situations?
a. invention of the iPod
b. introduction of airbags in cars
c. increased personal computer purchase in response to their decrease in price
d. more scoops of raisins in each package of Raisin Bran cereal
e. great use of fuel-efficient cars after gasoline prices increase

5. Suppose a US firm produces its product in Colorado but then exports all of its product. If the price of
that product increases,
a. How will the US GDP deflator be affected?

b. How will the US CPI be affected?

2