T. Gallaway

ECO 155

Fall 1999

Homework: Unit #2

Instructions: Answer all of the following questions. Be sure to complete each part of every question. When you turn in your homework, this handout must be used as a cover sheet. Place this sheet behind your answers, staple them all together, fold them all lengthwise and write your name and row number on the back of this sheet.

Note: Links used for the internet questions can be found on your course webpage.

  1. Use the table below to answer the following questions.

Income

Marginal

Tax Rate

$0 - $10,000

10%

$10,000 - $ 30,000

20%

$30,000 and above

50%

·         If you earned $50,000 per year, how much tax would you owe on the first dollar you earned?

·         How much tax would you owe on the last dollar you earned?

·         What would your average tax rate be?

  1. Which type of unemployment is most relevant to macroeconomics? Which type is not necessarily bad?

 

  1. Abe Lincoln earned $25,000 per year as president. Bill Clinton earns $200,000. The CPI (base year: 1982-4) was 9 in 1863 and was 159.1 in 1997.

·         Calculate the real income (in 1982-4 dollars) of each president.

·         Which president enjoyed the highest salary?

·         Can you convert Lincoln’s income to 1997 dollars?

  1. If the CPI was 148 a year ago and is 160 today, what was the inflation rate over the past year?

 

  1. Go to: http://stats.bls.gov/cps_htgm.htm

·         How many households are part of the sample that the BLS surveys each month to estimate unemployment?

·         If you are interviewed by the BLS as part of their survey and you answer “yes” to the first question but  “no” to the second and third questions, what will their next question be?

  1. Go to: http://stats.bls.gov/eag.table.html

·         What was the unemployment rate for September? What was it in September the year before?

·         What was the percentage change in the PPI in August 1998?

·         What was the percentage change in the CPI for May and June of this year?

  1. Go to: http://stats.bls.gov/cpifact8.htm

·         The CPI is reported monthly. However, it takes a while for the data to be collected and the index to be constructed. How long does this process take?

·         How many different indexes does the BLS publish every month as part of their CPI information?

·         How many regions does the BLS publish statistics for?

·         How many population classes?

·         List the eight major groups of goods & services that make up the market basket for the CPI.

·         What is the difference between the CPI-U & the CPI-W?

  1. Go to: http://stats.bls.gov/news.release/cpi.t01.htm

·         What was the Relative importance of food & beverages in the CPI-U in December 1998?

·         What was the relative importance of apparel?

·         If both men’s and women’s apparel increased in price by 10%, which would have the greater impact on the CPI? Why?