Price Indices and Inflation- Macro 2.4

Jacob Clifford's video tutorial on ACDC Econ explains inflation and the Consumer Price Index (CPI). It covers how to calculate CPI and inflation rates, emphasizing the importance of understanding base years and percent changes. The video includes practice problems to reinforce learning and clarifies common misconceptions about inflation calculations.

What does the inflation rate indicate?

• The number of goods produced in a year.

• The percentage of goods that are imported.

• The total value of goods in a market basket.

• The change in prices over a specific period of time.

What is the base year in the context of CPI?

• The year when the economy was most stable.

• The year with the highest inflation rate.

• The year when the CPI is set to 100.

• The year with the lowest market basket value.

What does a CPI of 150 indicate compared to the base year?

• Prices have decreased by 50% since the base year.

• Prices have remained the same since the base year.

• Prices have doubled since the base year.

• Prices have increased by 50% since the base year.

Why is the CPI for the base year always 100?

• Because it indicates the highest price level.

• Because it represents the average price level.

• Because it shows the lowest price level.

• Because it is a standard reference point for comparison.

What does a CPI less than 100 indicate?

• Prices are the same as the base year.

• Prices have doubled since the base year.

• Prices are lower than the base year.

• Prices are higher than the base year.

How is the CPI calculated?

• By dividing the current year's market basket value by the base year's value and multiplying by 100.

• By subtracting the base year's market basket value from the current year's value.

• By adding the current year's market basket value to the base year's value.

• By multiplying the current year's market basket value by the base year's value.

How can you verify your CPI calculation?

• By using both the market basket and CPI values.

• By ensuring the result is greater than 100.

• By comparing it to the base year value.

• By checking if the result is a whole number.

What is a common mistake when calculating inflation rate using CPI?

• Ignoring the base year CPI.

• Multiplying the CPI of one year by another.

• Subtracting the CPI of one year directly from another.

• Using the base year CPI for all calculations.

If the CPI in year one is 80 and in year two is 100, what is the inflation rate?

• 20%

• 15%

• 30%

• 25%

What is the purpose of practicing CPI calculations?

• To compare different countries' economies.

• To predict future inflation rates.

• To understand the concept of price changes over time.

• To memorize the base year values.