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# Thread: homework help (AP macroeconomics) (easy 17k reps)

1. ## homework help (AP macroeconomics) (easy 17k reps)

Two questions, but I'll rep you for answering either one. First come first served. If I happen to run out, I'll write your name down on a list and hit you in 24 hours - pinky promise (no hetero).

1.) Explain the meaning of the following CPIs relative to a base year. Lastly, explain why the percent change in prices from year 3 to year 4 is NOT 25%.

Year 1: 90
Year 2: 100
Year 3: 125
Year 4: 150

2.) Assume you put \$100 into the bank. Use numeric examples to explain 3 different scenarios in which your REAL income falls, stays the same, and increases. (bad wording I know, retard for a teacher)

Thanks again brahs.

3. Originally Posted by Patient Bear
Two questions, but I'll rep you for answering either one. First come first served. If I happen to run out, I'll write your name down on a list and hit you in 24 hours - pinky promise (no hetero).

1.) Explain the meaning of the following CPIs relative to a base year. Lastly, explain why the percent change in prices from year 3 to year 4 is NOT 25%.

Year 1: 90
Year 2: 100
Year 3: 125
Year 4: 150

2.) Assume you put \$100 into the bank. Use numeric examples to explain 3 different scenarios in which your REAL income falls, stays the same, and increases. (bad wording I know, retard for a teacher)

Thanks again brahs.
Okay I'm gonna take a stab at Number 1. Took Macroeconomics last semester and got an A so I think I have somewhat of an idea what I am doing (in b4 I am completely fuking wrong). So for year 1, the CPI indicates that total expenditures in that year were less than the base year, for year 2 expenditures were equal to the base year, for years 3 and 4 expenditures were greater than the base year. Finally, the percentage increase is not 25% because inflation is measured as the percentage increase of CPI from one year to the next, in other words ((150-125)/125) x 100 = 20% not 25%

EDIT: For further information CPI is calculated as (expenditures in the current year/expenditures in the base year) x 100. So if you have a CPI of less than 100 it means your total expenditures were less than the base year (90), equal to base year (100), greater than base year (125,150)

4. 1)Year 1 cost of living decreases. Deflation is present

Year 2 cost of living increases. Inflation is present

Year 3 cost of living increases. Inflation present

Year 4 cost of living increases but at a decreased rate. Inflation is slowing/turning into deflation

2) Stays the same: \$100 into bank with 5% interest. Inflation is 5%

Falls: \$100 into bank with 5% interest rate. Inflation is 10%

Increases: \$100 into bank with 5% interest rate. Inflation is under 5%

EDIT: I would assume your teacher doesn't expect the poverty answer of a simple math calculation for question 1. Anyone can figure that out without knowing economics. Teacher is most likely asking why the rate of the CPI increase is slowing after year 3.

5. Originally Posted by LimitlessRX
1)Year 1 is base year.
wait wot, I thought base year CPI is set at 100

6. Originally Posted by Patient Bear
wait wot, I thought base year CPI is set at 100
Whoops sorry. Typed this chit up real quick and dun goofed. You are correct. Will fix

7. Originally Posted by LimitlessRX
Whoops sorry. Typed this chit up real quick and dun goofed. You are correct. Will fix
Thanks brah. Gonna get you on rc, already wrote your name down.

8. Originally Posted by Patient Bear
Thanks brah. Gonna get you on rc, already wrote your name down.
Anytime. Hope it helps. Thanks for rapes

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