The CPI’s at the start of each decade from 1940 to 1990 were: Year 1940 1950 196
ID: 3146959 • Letter: T
Question
The CPI’s at the start of each decade from 1940 to 1990 were: Year 1940 1950 1960 1970 1980 1990 CPI 14.0 24.1 29.6 38.8 82.4 130.7
Q15: What was the rate of inflation for the 1950’s, as measured by the percentage change in the CPI?
Q16: What was the rate of inflation for the 1970’s, as measured by the percentage change in the CPI?
Q17: Name the major category added for the market basket of goods and services in 1998?
Q18: Tuition at University Z was $1000 per quarter in 1985 (CPI = 107.6). How much should
tuition be in 2001 adjusted for inflation (CPI = 175.1)?
The following 2 questions (Q19 to Q20) are either “True” or “False”
Q19: The current ‘base period’ that we are on is 1982-1984.
Q20: ‘Child care’ is one of the eight major categories of goods and services in the market
basket.
Explanation / Answer
To determine the rate of inflation find the difference between this year's index and last year's index, divide that number by last year's index and multipy the quotient by 100.
15. Rate of inflation for 1950 = [(CPI of 1950 - CPI of 1940)/ CPI of 1940] x 100 =[( 24.1-14.0)/14.0] x 100 =72.142%
16. In the same way rate of inflation for 1970= [(CPI of 1970 - CPI of 1960) / CPI of 1960] x 100 =[(38.8 - 29.6) / 29.6] x 100 =31.08%
17. Education and communication was the major category added.
18. 1985 price = $ 1000 1985 CPI= 107.6
2001 CPI=175.1 to calculate price in 2001.
1985 price / 2001 price = 1985 CPI / 2001 CPI
2001 Price = (2001 CPI x 1985 price) / 1985 price
=(175.1 x 1000)/ 107.6 = $1627(approx)