Chapter 7: The Macroeconomy: Unemployment, Inflation, and Deflation

Discuss the types of unemployment.

Describe how price indexes are calculated and define the key types of price indexes

Evaluate who loses and who gains from inflation and distinguish between nominal and real interest rates

Understand key features of business fluctuations.

In 2016, the cost of a market basket of goods was $2,000.In2018,thecostofthesamemarketbasketofgoodswas$2,100. Use the price index formula to calculate the price index for 2018 if 2016 is the base year.

Suppose that in 2017, a typical U.S. student attending a state-supported college bought 10 textbooks at a price of 100$perbookandenrolledin25credithoursofcourseworkatapriceof360$ per credit hour. In 2018, the typical student continued to purchase 10 textbooks and enrol in 25 credit hours, but the price of a textbook rose to 110$perbook,andthetuitionpriceincreasedto400$ per credit hour. The base year for computing a "student price index" using this information is 2017. What is the value of the student price index in 2017? In 2018? Show your work.