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Macro Economics Unemployment and Cost of Living. Please Help!?

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Macro Economics Unemployment and Cost of Living. Please Help!?

Postby mace » Sun Mar 04, 2012 12:46 am

Hi, Could someone please help me with 2 econ questions. I tried to determine the correct answer but I am a little confused

Which of the following IF TRUE would illustrate why price indexes might overstate inflation in cost of going to college? Choose all that apply.
a) as the price of textbooks increased, more and more students turned to the used book market or chose not to buy textbooks at all, instead using the copies on reserve in the library.
b) professors required students to purchase 10 textbooks each, regardless of price.
c) The quality and design of calculators improved dramatically from 2006 to 2008. For example, calculators made in 2008 accept memory cards, while most made in 2006 did not.

I think it is just A but is it B also?

2.Treewood Equipment manufactures feller bunters in the united States. Feller bunchers are commercial forestry machines that cut and stack trees. An increase in the price of a treewood feller buncher will/will not show up in the gdp deflator and will/will not show up in the consumer price index

I think it will show up in both GDP and CPI

If you could please explain the reasoning behind the right answer, i would greatly appreciate it. Thank you!
mace
 
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Macro Economics Unemployment and Cost of Living. Please Help!?

Postby bocley » Sun Mar 04, 2012 12:47 am

Maybe someone else will answer too.....
1.) Would be anything that makes going to college cheaper....like using used textbooks (so A)....If being able to use memory cards in a calculator would save a college student money too (seems it would), it would be 'A' and 'C'. Buying 10 new textbooks would make things more expensive not less.
2.) The CPI (Consumer Price Index) only measures the cost of 'consumer products' (those often used by consumers), so a 'commercial forestry machine' would not be in there.
bocley
 
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