All group activities must include a statement signed by all members of your group that each group member fully participated in the activity. To start you should open a new Word document entitled something like "Group Activity 7" and put the names of your group members at the top. Save it to the desktop and save frequently during the hour.

Learning Goal for this Activity

1. You will compare two prices for the same commodity from different years.

1. These questions require the use of the table CPI.xls. For an explanation on how to do this type of problem, see CPI tutorial.

(a) The average price of a gallon of gasoline (regular unleaded) in 1976 was $0.64. In 1998 it was $1.06. In constant dollars is price of gasoline in 1998 more or less than in 1976? (Use constant 1998 dollars to determine your answer. As always explain your reasoning!)

(b) In 1989, red delicious apples cost on average $0.57 per pound. In 1995, they cost $0.83 per pound. Were apples more or less expensive in 1995 than in 1989? Explain your reasoning.

2. The official definition of "poverty level" is supposed to be adjust for the effects of inflation. For a family of four, the poverty level was an income of $3,743 in 1970 and $5,050 in 1975.

(a) Do these incomes have approximately equal buying power in their respective years, as they should if "poverty level" had the same meaning in both periods?

(b) Convert the1975 poverty line into 1997 dollars. How does it compare to the federal poverty line of $16,100 in 1997?