# Economics

posted by .

From 1962 to 1965, federal spending on non-defense-related education and training rose from \$9.6 billion to \$19.5 billion, while from 2001 to 2004, it rose from \$178.4 billion to \$217.5 billion. Given that the Consumer Price Index ( in January) was 30.0 in 1962, 31.2 in 1965, 175.1 in 2001, and 185.2 in 2004, which was the larger increase in education and training expenses?

I know from 62-65 there was a 9.9b increase and a cpi increase of 1.2

from 01-04 there is 39.1b increase and cpi is 10.1 increase

this is where im confused do i multiply the 2 sets together and the bigger one is the larger increase?

thanks

• Economics -

You could work this problem in one of two ways. You could convert all of the nominal dollar values your are given and convert them into 1984 dollars (CPI in 1984 = 100). Or you express the 1965 nominal dollar in real 1962 dollars by dividing by the change in CPI from 62 to 65. Same same for the 2001 to 2005 values.

So, method one:
\$9.6 in 1984 dollars = 9.6/.30=\$32
19.5 in 1984 dollars = 19.5/.312=62.5
% change is (62.5/32)-1 = 95.3%
That is, real education spending grew by 95.3%
repeat for 2001 to 2004

Method two.
19.5 in 1962 dollars is 19.5/(.312/.3) = 18.75
% change is (18.75/9.6)-1 = 95.3%

Again, repeat for 2001 to 2004

## Similar Questions

1. ### Economics

The value of the marginal propensity to save is 0.2. If real GDP increases by \$50 billion, this situation was the result of an increase in the aggregate expenditures schedule of: a. \$10 billion b. \$15 billion c. \$16 billion d. \$40 …
2. ### Economics

If a government raises its expenditures by \$50 billion and at the same time levies a lump-sum tax of \$50 billion, the net effect on the economy will be to: a. increase GDP by less than \$50 billion b. increase GDP by more than \$50 billion …
3. ### Economics

Suppose that S(savings) = \$4 billion when Real GDP = \$200 billion & S(savings) = \$104 billion when Real GDP = \$600 billion. If Autonomous investment falls by \$100 billion what would be the effect on Real GDPeqm.?
4. ### Microeconomics

Question: Consider trade relations between the Country A & Country B. Assume that the leaders of the two contries believe the payoffs to altrenative trade policies are as follows: ,,,,,,,,,,,,,,,,,,Country A ,,,,,,,,,,Low Tarriffs|High …
5. ### Principles of Finance

Determine the size of the M1 money supply using the following information. Currency \$700 billion Money market mutual funds \$2,000 billion Demand deposits \$300 billion Other checkable deposits \$300 billion Traveler’s checks \$10 billion
6. ### Educational tech-1 question

Use the text below written by Connections Education in 2012 to answer the following questions. The Second Industrial Revolution was not just marked by new inventions. New business practices were invented that transformed America’s …
7. ### Ed tech- Plz, plz help

The Second Industrial Revolution was not just marked by new inventions. New business practices were invented that transformed America’s economy. Between 1869–1910, the value of American manufacturing rose from \$3 billion to \$13 …
8. ### economics (4)

Assume that the following data describe the condition of the banking system: Total reserves \$200 billion Transactions deposits \$800 billion Cash held by public \$400 billion Reserve requirement 0.20 By how much could the banks increase …
9. ### Economics (4)

Assume that the following data describe the condition of the banking system: Total reserves \$200 billion Transactions deposits \$800 billion Cash held by public \$400 billion Reserve requirement 0.20 By how much could the banks increase …
10. ### economics (4)

Assume that the following data describe the condition of the banking system: Total reserves \$200 billion Transactions deposits \$800 billion Cash held by public \$400 billion Reserve requirement 0.20 By how much could the banks increase …

More Similar Questions