Table 20-17
$$\begin{array} { | c | c | c | }
\hline \text { Year } & \begin{array} { c }
\text { Nominal Average } \
\text { Hourly Earnings }
\end{array} & \begin{array} { c }
\text { CPI } \
( \mathbf { 1 9 8 2 - 1 9 8 4 } = \mathbf { 1 0 0 } )
\end{array} \
\hline 2014 & \$ 10 & 188.9 \
\hline 2015 & 11 & 195.3 \
\hline 2016 & 13 & 201.6 \
\hline
\end{array}$$
-Between 2015 and 2016,the CPI of a small nation rose from 182 to 185.If household incomes rose by 3% during that period of time,which of the following is true?
A)The purchasing power of household income rose between 2015 and 2016.
B)The purchasing power of household income fell between 2015 and 2016.
C)The purchasing power of household income remained constant between 2015 and 2016.
D)The CPI cannot be used to determine how the purchasing power of household income changes over time.

Question

Table 20-17
 $$\begin{array} { | c | c | c | } 
\hline \text { Year } & \begin{array} { c } 
\text { Nominal Average } \
\text { Hourly Earnings }
\end{array} & \begin{array} { c } 
\text { CPI } \
( \mathbf { 1 9 8 2 - 1 9 8 4 } = \mathbf { 1 0 0 } )
\end{array} \
\hline 2014 & \$ 10 & 188.9 \
\hline 2015 & 11 & 195.3 \
\hline 2016 & 13 & 201.6 \
\hline
\end{array}$$
-Between 2015 and 2016,the CPI of a small nation rose from 182 to 185.If household incomes rose by 3% during that period of time,which of the following is true?
A)The purchasing power of household income rose between 2015 and 2016.
B)The purchasing power of household income fell between 2015 and 2016.
C)The purchasing power of household income remained constant between 2015 and 2016.
D)The CPI cannot be used to determine how the purchasing power of household income changes over time.

Quizplus · Accepted Answer

Since the CPI rose from 182 to 185, the overall cost of goods and services increased by approximately 1.6%. However, since household incomes rose by 3%, the purchasing power of household income increased. This means that households were able to purchase more goods and services with their income, indicating an increase in purchasing power. Therefore, option A is correct. Option B is incorrect because household incomes rose by 3%, indicating an increase in purchasing power. Option C is incorrect because household incomes increased, indicating an increase in purchasing power. Option D is incorrect because the CPI can be used to determine changes in purchasing power over time.

Table 20-17 -Between 2015 and 2016,the CPI of a Small Nation Rose