08 Jun Question ECON 3050 HWK #1, F2015
Question
ECON 3050
HWK #1, F2015
__________________________________________Score:______ _
Print Last Name, First Name
You may print this double-sided; if you print it single-sided, BOTH pages must be stapled together in the
upper left corner in order to receive credit for the assignment. Use correct symbols on your answers
(%, $). This assignment is worth 10 points.
1.
The table below gives Bob’s income and the price index for the last 4 years. Respond to parts
a. – e.using the information in the table.
Year
CPI
Nominal Income
1
95
$48,000
2
100
$50,000
3
106
$53,000
4
110
Real Income
$56,500
a.
The annual inflation rate for year 2 is ___________, rounded to the tenth.
b.
The base year is year ______ because the price index is _________ in that year.
c.
Fill in the blanks for real income, rounded to the dollar, in the table above.
d.
The purchasing power of nominal income _____________________ from year 1 to year 2,
______________________ from year 2 to year 3, and __________________ from year 3 to year 4
(fill in the above blanks with one of the following: increased, decreased, or stayed the same)
2.
Suppose you are offered a job at $50,000 per year in Atlanta where the cost-of-living index is
220.048. A second job offer in Boston promises to pay you the same real income (purchasing
power) as the Atlanta offer. What nominal salary must be offered by the Boston job where the
cost-of-living index is 256.376? Round your answer to the dollar.
The Boston job offer must be __________________ for it to have the same purchasing power as
the Atlanta job offer.
1
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