Unit 3D

Unit 3D

Index Numbers: The CPI and Beyond

Fixed vs. Growth Mindset

https://www.youtube.com/watch?v=KUWn_TJTrnU

Fill in the Blanks

17. If someone needed $25,000 to maintain a certain standard of living in 1986, how much would be needed to maintain the same standard of living in 2016?

•  $price\ in\ 2016\ =\ price\ in\ 1986\ \cdot\frac{CPI\ _{2016}}{CPI\ _{1986}}$  

•  $price\ in\ 2016\ =25,000\cdot\frac{240}{109.6}$  

• $54744.52

Fill in the Blanks

19. What was the overall increase in prices due to inflation as a percentage from 1995 to 2005?

•  $\frac{CPI_{2005}-CPI_{1995}}{CPI_{1995}}$  

•  $\frac{195.3-152.4}{152.4}\approx0.28149$  

Fill in the Blanks

 27. For a house valued at $400,000 in Phoenix, find the price of a comparable house in Miami.

•  $price\ in\ Miami\ =\ price\ in\ Phoenix\ \cdot\frac{index\ in\ Miami}{index\ in\ Phoenix}$  

•  $price\ in\ Miami=400,000\cdot\frac{161}{122}$  

• $527,868.85

31. Health Care Spending. Total spending on health care in the United States rose from $85 billion in 1977 to $3.2 trillion in 2015. Compare the relative change in health care spending to the overall rate of inflation as measured by the Consumer Price Index. (nearest percent)

 $\frac{3,200,000,000,000-85,000,000,000}{85,000,000,000}\ \ or\ \ \ \frac{3,200-85}{85}$  = 36.647 = 3665%

Fill in the Blanks

31. Health Care Spending. Total spending on health care in the United States rose from $85 billion in 1977 to $3.2 trillion in 2015. Compare the relative change in health care spending to the overall rate of inflation as measured by the Consumer Price Index.

 $\frac{CPI_{2015}-CPI_{1977}}{CPI_{1977}}=\frac{237-60.6}{60.6}=2.91089$  

So , 291% inflation vs. the 3665% health care.

Fill in the Blanks

Fill in the Blanks

Fill in the Blanks

44. Revise the above table to express all prices in terms of 2016 dollars.

•  $price\ in\ 2016\ =\ price\ in\ 1986\cdot\frac{CPI_{2016}}{CPI_{1986}}$  

•  $price\ in\ 2016\ =391\cdot\frac{240}{109.6}=856.20$  

•  $price\ in\ 2016\ =\ 369\cdot\frac{240}{156.9}=564.44$  

•  $price\ in\ 2016=636\cdot\frac{240}{201.6}=757.14$  

Open Ended

44. Price of Gold. The price of gold (end-of-year closing price in dollars per troy ounce) is shown in the table below.

c. If you bought 3 ounces of gold in 2006 and sold it in 2016, would you have seen a profit (adjusted for inflation)? Explain.