Practice Problems:

Adjusting for Inflation and Creating Inflation Indices

ECON 101 – Macroeconomics
Professor Schenk
September 28, 2009

1. Consider the nominal prices and price index below. Adjust for inflation to 2008.

Year Nominal Amounts Price Index Real Amounts

2004 $2,126 100
2005 2,055 97
2006 2,188 103
2007 2,269 107
2008 2,399 113

2. Now use the data from above to comprise the price index. Below are just the nominal amounts. Use
2004 as the base year and find the price index. Your answer below should match the price index from
above.

Year Nominal Amounts Price Index

2004 $2,126
2005 2,055
2006 2,188
2007 2,269
2008 2,399

The answer sheet is provided online with my audio notes. See the original entry for a link.