|
Economics 121 B & C |
Quiz 7 - Answers |
Friday, November 7, 1997 |
|
Prof. A. D. Becker |
|
Item |
1981 |
1997 |
|
CPI (base period = 1982-4) |
90.9 |
161.2 |
|
Student work wage rate: $/hour |
$4.25 |
$5.75 |
|
Price of typical economics textbook: $ |
$22 |
$60 |
|
Tuition, room, and board: $ |
$4,700 |
$20,000 |
1) Determine the real wage rate for student work in 1981 and 1997.
Real Wage = (Nominal Wage/CPI)x100
1981: Real Wage = (4.25/90.9)x100 = $4.68
1997: Real Wage = (5.75/161.2)x100 = $3.57
2) By what percentage has the real price of a textbook gone up or down?
Real Price = (Nominal Price/CPI)x100
1981: Real Price = (22/90.9)x100 = $24.20
1997: Real Price = (60/161.2)x100 = $37.22
% change = +54%
3) What was 1981's student worker paid in today's dollars?
Today's Dollars = Nominal Price x (today's CPI/CPI then)
Answer: 4.25 x (161.2/90.9) = $7.54
4) What was 1981's tuition, room, and board in today's dollars?
Answer: 4,700 x (161.2/90.9) = $8334.87