Practice Problems - Inflation

Practice Problems: Adjusting for Inflation and Creating Inflation Indices ECON 101 – Macroeconomics Professor Schenk September 28, 2009 1. Consider the nominal prices and price index below. Adjust for inflation to 2008. Year 2004 2005 2006 2007 2008

Nominal Amounts $2,126 2,055 2,188 2,269 2,399

Price Index 100 97 103 107 113

Real Amounts

2. Now use the data from above to comprise the price index. Below are just the nominal amounts. Use 2004 as the base year and find the price index. Your answer below should match the price index from above. Year 2004 2005 2006 2007 2008

Nominal Amounts $2,126 2,055 2,188 2,269 2,399

Price Index

The answer sheet is provided online with my audio notes. See the original entry for a link.

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