econ

Name: ___________________________ Class: _________________ Date: __________

Assignment 5 ECON 002

1. A basket of goods and services costs $200 in 2017 and $225 in 2018. Using 2017 as the base year, calculate the consumer price index (CPI) for 2017 and for 2018.

2. Suppose real gross domestic product (GDP) grows by 2%, the inflation rate is 2%, and the money supply grew by 3%. Use the equation of exchange to find the implied change in the velocity of money?

3. Suppose a government prints a large quantity of money to pay its debts to domestic creditors, and yet prices do not subsequently rise. Use the equation %ΔM + %ΔV ≈ %ΔP + %ΔY to describe what may have happened.

4. Explain how to calculate the inflation rate as a percentage, and how to interpret it.

5. The consumer price index (CPI) in the base year will always have the value of ________.

a. 0

b. 1

c. 50

d. 100

e. 200

6. The agency that measures the consumer price index (CPI) in the United States is the

a. Congressional Budget Office.

b. Bureau of Economic Analysis.

c. Bureau of Labor Statistics.

d. Federal Reserve.

e. U.S. Department of the Treasury.