Question

calculating real price, precentage of change, convert the real price into dollars, and…

2. The following table shows the average retail price of butter and the Consumer Price Index from 1980 to 2000, scaled so that the CPI = 100 in 1980.
? 1980 1985 1990 1995 2000
CPI 100 130.58 158.56 184.95 208.98
Retail price of butter (salted, grade AA, per lb.) $1.88 $2.12 $1.99 $1.61 $2.52

a. Calculate the real price of butter in 1980 dollars. Has the real price increased/decreased/stayed the same since 1980?
b. What is the percentage change in the real price (1980 dollars) from 1980 to 2000?
c. Convert the CPI into 1990 = 100 and determine the real price of butter in 1990 dollars.
d. What is the percentage change in the real price (1990 dollars) from 1980 to 2000? Compare this with your answer in (b). What do you notice? Explain.

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