AP Macroeconomics Mea 1 F a Define the Consumer Price Index Cpi Inflation Deflation Disinflation the Inflation Rate and Real Variables B Explain Questions

Calculate CPI and inflation, distinguish nominal from real variables, and explain how price-level changes affect real wages and living standards.

Exam points

interpret CPI as the cost of a fixed consumer basket relative to a base-year value of 100
calculate CPI or another price index from base-year basket costs and current prices
calculate inflation as the percentage change in a price index
identify inflation, deflation or disinflation from changes in the price level or inflation rate
use a price index or inflation rate to compare nominal values, real wages and purchasing power over time

[Maximum number: 2]

The table provided shows economic data for the country of Louland. The base year is year 1, and the GDP deflator in year 2 is 115.

Table for Question AP Macroeconomics Mea 1 F a Define the Consumer Price Index Cpi Inflation Deflation Disinflation the Inflation Rate and Real Variables B Explain Questions question 1 — AP Macroeconomics

(a)

What was the numerical value of the inflation rate from year 1 to year 2 ?

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(b)

If nominal wages increased by 10\% from year 1 to year 2, what happened to the real wages of workers in Louland during this time? Explain.

Begin your response to this question at the top of a new page in the separate Free Response booklet and fill in the appropriate circle at the top of each page to indicate the question number.

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AP Macroeconomics Mea 1 F a Define the Consumer Price Index Cpi Inflation Deflation Disinflation the Inflation Rate and Real Variables B Explain Questions question 1

Question (a)

Question (b)