Homework Helpers - Problem Set #2

Here are some comments about some of the homework problems.

Problem 1. For part B, all your answers should be 100% or 0%.

Problem 2. You need to take the formula for the GDP deflator and solve it for Real GDP. Then you can use the values in the table to solve for GDP in 1996 dollars. (This formula was used in Monday's class and it is also in the text book.)

Problem 3. Mankiw has a good discussion of this.

Problem 4. OK, don't fall into the trick trap. To calculate a CPI you must use a fixed market basket. If you calculate a market basket that varies you will not get full credit for this problem.

Problem 5. To get the information you need you should look at the "Latest Numbers" Box on the BLS homepage. Click on the CPI link. Then click on the Summary link. All the information you need is there. Why don't I just give you the URL? Because it would be a good experience to poke around this website. There is alot of stuff there. Often overwhelming. But one of these days you may have to poke around such a website looking for data for another class. A little familiarity goes a long way.

Problem 6. You need to calculate the percentage change in the price of newspapers and the percentage change in wages. Compare the two percentages. For someone to be "getting ahead" their incomes should be growing faster than the prices of goods and services.

More commments will be posted later.