Principles of Economics 7Th Edition Frank Solutions Manual Full Chapter PDF

Principles of Economics 7th Edition
Frank Solutions Manual

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CHAPTER 18 INFLATION AND THE PRICE
LEVEL
Answers to Review Questions

1. The official cost-of-living index, the CPI, measures the cost of buying a particular
“basket” of goods and services, relative to a specified base year. The official basket
of goods and services is intended to correspond to the buying patterns of the typical
family. A family whose buying patterns differ from the average may find that
changes in its cost of living are not well captured by the official CPI. For example, if
the price of peanut butter rises sharply, the cost of living for a family that buys much
more peanut butter than the typical family will increase more than the CPI, all else
being equal.
Learning Objective: 18-01

AACSB: Reflective Thinking
Bloom’s: Understand
2. The price level measures the cost of a basket of goods and services, relative to a base
year. The CPI is one standard measure of the price level. In contrast, the rate of
inflation is the annual percentage change in the price level.
For example, suppose that the basket of goods and services on which the CPI is based
cost $100 in the base year, $150 last year, and $154.50 this year. The price level this
year is 1.545 (= $154.50/$100.00). The inflation rate from last year to this is the
percentage increase in the cost of the basket since last year,
154.50 − 150.00 4.5
= = 0.03 or 3%.
150.00 150

Bloom’s: Remember
3. It is important to adjust for inflation when comparing nominal quantities at different

points in time because with inflation, increases in nominal quantities may simply
reflect higher prices rather than increased production or purchasing power. For
example, a 10% increase in a worker’s nominal wage implies a 10% increase in
purchasing power if prices are unchanged, but no increase in purchasing power if
prices have also risen by 10%.
The basic method of adjusting for inflation, called deflating the nominal quantity,
is to divide a nominal quantity by a price index, such as the CPI. For example, the
real wage is equal to the nominal wage divided by a price index and measures the
1
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purchasing power of the wage. Unlike nominal wages, real wages can be
meaningfully compared over time.

Bloom’s: Remember
4. In an indexed labor contract, wages each year would automatically be increased at the
rate of inflation, preserving the purchasing power of the agreed-upon wage. For
example, if prices of consumer goods rise by 2% over the year (that is, the rate of
inflation is 2%), an indexed wage will also automatically rise by 2% so that the
quantity of goods the worker can purchase remains unchanged.

Bloom’s: Understand
5. First, quality adjustment bias occurs when government statisticians underestimate

quality improvements. For example, if candy bars weigh 10% more than last year
and also cost 10% more, there is no true inflation in candy bar prices since the price
per ounce is unchanged. However, if the statisticians fail to note the increase in
weight and simply record the 10% increase in price, they will mistakenly overstate
inflation. The more subtle improvements in quality are (for example, more effective
medical procedures), the harder they are to measure precisely, which increases the
risk of overstating inflation.
Second, substitution bias occurs because the CPI assumes a fixed basket of goods
and services that does not allow for the possibility of consumer substitution of less
expensive items for more expensive ones. For example, if a particular type of candy
bar is included in the official basket, and the price of this candy bar rises, then an
increase in the official cost of living will be recorded. However, if people can switch
from one type of candy bar to another desirable that has not increased in price, then
the “true” cost of living will not have risen despite what the CPI shows.

AACSB: Knowledge Application
Bloom’s: Apply
6. The first two sentences are correct; the losses that unanticipated inflation imposes on
creditors (for example) are just offset by the gains to debtors. The third sentence is
not correct, however, as there is an overall cost to society when wealth is redistributed
arbitrarily. First, the role of luck in the distribution of income is increased since the
size of one’s return depends on whether inflation is high or low; this makes people
feel worse off and is a cost to society. Second, when wealth is determined more by
2
random forces than by hard work and intelligent investment, the incentives to engage
in the latter are reduced, harming the efficiency of the economy. Finally, people use
up resources attempting to anticipate inflation and protect themselves against it; from
society’s point of view, these resources are wasted.

AACSB: Analytical Thinking
Bloom’s: Analyze
7. The real return on any asset is the nominal return (or nominal interest rate) minus the
inflation rate. The nominal return on cash is zero, so the real return equals the
nominal interest rate minus the inflation rate. That is, the return to cash is negative
whenever there is inflation, and each additional point of inflation reduces the real
return to holding cash (i.e. makes it more negative) by one point.

Bloom’s: Analyze
8. True. Suppose the borrower and lender agree on a 2% real return on the loan. If they
correctly anticipate that inflation over the life of the loan will be, say, 5%, then setting
a 7% nominal interest rate on the loan ensures that the lender receives and the
borrower pays a 2% real return, as agreed beforehand. (Note that this ignores any
complications introduced by differential in taxes between the borrower and lender.)

Bloom’s: Evaluate
Answers to Problems
1. a. The cost of the goods in the base year is $200 + $600 + $100 + $50 = $950. In
the subsequent year the same goods costs $220 + $640 + $120 + $40 = $1,020.
The CPI in the subsequent year equals the cost of the goods in that year relative to
the base year: $1,020 / $950 = 1.074.
Since the CPI in the base year is 1.000, the rate of inflation (equal to the
percentage increase in the CPI) between the base year and the subsequent year is
7.4%.
b. The family’s nominal income rose by 5%, which is less than the increase in the
family’s cost of living. The family is thus worse off in terms of real purchasing
power.
3
Bloom’s: Apply
2. The inflation rate between 1990 and 1991 is the percentage increase in the price level
between those years: (136.2 -130.7)/ 130.7 = 4.2%. Inflation rates for the years 1991
through 2000 are presented below.
Inflation Rate
Year CPI (%)
1990 130.7
1991 136.2 4.2
1992 140.3 3.0
1993 144.5 3.0
1994 148.2 2.6
1995 152.4 2.8
1996 156.9 3.0
1997 160.5 2.3
1998 163 1.6
1999 166.6 2.2
2000 172.2 3.4
The inflation rates were relatively low throughout the 1990s, but lower at the end of the
decade than at the beginning.

Bloom’s: Apply
3. a. Using the CPI data from problem 2, the real entry-level wage for college
graduates in 1997 was $13.65/1.605 = $8.05
b. Since the real wage fell by 8% between 1990 and 1997, the $8.50 real wage in
1997 was 92% of the real wage in 1990:
8.50 = (0.92)(real wage in 1990)
Real wage in 1990 = $9.24
c. Let W1990 stand for the nominal wage in 1990. Then, if we deflate the nominal
wage by the CPI, we have W1990/1.307 = $9.24. Solving for W1990 gives us a
nominal wage in 1990 of $12.08.

Bloom’s: Apply
4
4. The rate of inflation between 2014 and 2016 (the percentage increase in the price
185 − 175 10
level) is = = 0.057 = 5.7%. To keep tax brackets at the same points in
175 175
terms of real income, the nominal income categories should each be increased by
5.7%. The tax schedule for the year 2016 is:
Family income Tax rate

<$21,140 10%
$21,141 - $31,710 12%
$31,711 - $52,850 15%
$52,851 - $84,560 20%
>$84,560 25%
Note: If you calculated the inflation rate to more decimal points, your answers will be
slightly different from those above.
Bloom’s: Apply
5. The real median income is determined by dividing the nominal income by the CPI for
the given year and multiplying the result by 100. The results for each year are given
in the table below:
Nominal Real
Year Income CPI Income
1985 $23,618 107.6 $21,949.81
1995 $34,076 152.4 $22,359.58
2005 $46,326 195.3 $23,720.43
2010 $49,276 218.1 $22,593.31
Based on the information in the table, real median household income rose between
1985 and 2005, but then declined between 2005 and 2010.
In Connect the 2010 nominal income value is replaced with a 2015 nominal income
value of $57,230. CPI value for 2010 was replaced with 2015 CPI value of 237.0.
Real income for 2015 equals $24,147.68

Bloom’s: Apply
5
6. a. The cost of the basket in 2015 is $90 + $60 + $80 = $230.
In 2016, the cost is $150 + $70 + $80 = $300.
300 − 230 70
The official “cost of eating” has increased by = = 0.304 or 30.4%
230 230
between 2015 and 2016.
b. Since two chickens now cost more than one ham, people will switch from 30
chickens to 15 hams, for a total ham consumption of 25. The cost of the food
basket in 2016 is now (25 hams)($7 per ham) + (10 steaks)($8 per steak) = $255.
255 − 230 25
The true increase in the cost of eating is = = 0.1086 or 10.9%.
230 230
This is a much lower increase in the cost of eating than the official estimate of
30.4%. The overestimate of inflation in the cost of eating reflects substitution
bias.
Learning Objective: 18-01; 18-03

Bloom’s: Apply
7. The fourth column in the table below shows the real price of gasoline, calculated as
the nominal price of gasoline divided by the CPI. The fifth column shows the year-
to-year percentage change in the real price of gasoline, and the sixth column shows
the inflation rate (i.e. the year-to-year percentage change in the CPI).
Gasoline Real Percentage change

price CPI price of in real price of
Year ($/gallon) (1982-1984 = 1) gasoline gasoline Inflation
1978 0.663 0.652 1.017
1979 0.901 0.726 1.241 22.0% 11.3%
1980 1.269 0.824 1.540 24.1% 13.5%
1981 1.391 0.909 1.530 -0.6% 10.3%
1982 1.309 0.965 1.356 -11.4% 6.2%
1983 1.277 0.996 1.282 -5.5% 3.2%
1984 1.229 1.039 1.183 -7.7% 4.3%
1985 1.241 1.076 1.153 -2.5% 3.6%
1986 0.955 1.136 0.841 -27.1% 5.6%
The table shows that a large part of the fluctuations in oil prices reflected changes in
the real price of gas, rather than general inflation. Most striking, the real price of gas
fell 27% in 1986 while the inflation rate was 5.6%.
6
Learning Objective: 18-01; 18-04
Bloom’s: Apply
8. First, calculate inflation for each year. For 2012, inflation is the percentage increase
in the CPI over that year, equal to (105 – 100)/100 = 5%. For 2013, inflation is (110
– 105)/105 = 4.8%. For 2014, inflation is (118 – 110)/110 = 7.3%. The real return
equals the nominal interest rate minus the inflation rate. Subtracting the inflation rate
for each year from the nominal interest rate (6% in each year) gives real returns of 1%
in 2012, 1.2% in 2013, and –1.3% in 2014.
Now consider the three-year period as a whole. At the end of one year, Albert’s
$1,000 is worth $1,060. Assuming that interest is re-invested, at the end of two years
he has ($1,060)(1.06) = $1,123.60, and at the end of three years he has
($1,123.60)(1.06) = $1,191.02, for a total gain of 19.1%. The price level has risen by
18% over the three years, so Albert’s total real return over the three years is 19.1% –
18% = 1.1%.

Bloom’s: Apply
9. a. Inflation is expected to be (110-100)/100 = 10% in the first year and (121-

110)/110 = 10% in the second year. If Frank charges Sarah a 12% nominal
interest rate, he will earn a real return of 2% per year (12% nominal interest rate –
10% inflation rate).
b. To ensure a 2% annual return on the loan, Frank and Sarah should agree that Sara
will pay a nominal interest rate in each year equal to 2% plus whatever the
inflation rate turns out to be. For example, if inflation turns out to be 8% during
the first year and 10% during the second year, Sarah should pay 10% nominal
interest in the first year and 12% in the second year.

Bloom’s: Apply
10. A consumer who spent $100 in the base year would spend $17.80 on food and
beverages, $42.80 on housing, $6.30 on apparel and upkeep, and so on. To buy the
goods and services this year, which cost $100 in the base year, the consumer would
have to increase his spending on food and beverages from $17.80 to $19.58 (a
10% increase), on housing from $42.80 to $44.94, and on medical care from $5.70 to
$6.27. Other expenditures would be the same as in the base year. The total cost of the
7
basket in the current year is $104.49, so the CPI for the current year is 1.0449
(104.49/100) or 1.045.

Bloom’s: Apply
8
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Emperor’s frown, his, viii. 309.
empty praise or solid pudding, iii. 171.
empurpling all the ground, x. 187.
emulation, the native hue of, etc., xii. 201.
enameller of the moon, the, v. 300.
enchantments drear, x. 41.
encroachment, the figure of, iii. 75.
ends of verse and sayings of philosophers, i. 394; xi. 489.
endure to the end for liberty’s sake, ix. 162.
enemy had written a book, O that mine, vi. 205.
enemy of the human race, viii. 284; ix. 321.
enfeebles all internal strength of thought, vi. 71.
enforc’d to seek some covert nigh at hand, etc., xi. 503.
England had made Bonaparte, etc., iii. 99.
English nation, universal, vii. 167.
enlarge the conceptions or warm the heart of the spectator, to, vi.
134.
enriched, ix. 211.
Enter Sessami, vii. 86; xii. 120.
Entire affection scorneth nicer hands, viii. 455; ix. 22; xi. 524; xii.
238, 259.
envy, malice, etc., xii. 381.
Epicuri de grege porcus, iii. 42.
Epithalamia were thrown into his coffin, x. 214.
equal want of books and men, viii. 29.
equally great on a ribbon or a Raphael, ix. 352.
Erasmus aut Diabolus, Aut, ix. 34 n.
Ere the sun through heaven, etc., x. 271.
Eremites and friars, etc., xii. 337.
error of the time, the very, xi. 251.
escap’d from Pyrrho’s maze, etc., iii. 258.
essence of genius is concentration, x. 279.
Et ego in Arcadia vixi, vi. 172.
Eternal City, a part of the, ix. 232.
ethereal braid, sky-woven, xii. 203.
etherial braid, thought woven, iv. 216.
Ethiopian change his skin, Can the, etc., vii. 240, 370.
Et quum conabar scribere, versus erat, v. 79.
Et toi, guerrier infortuné, etc., xi. 282.
Et vous êtes Yorick! vii. 33.
eulogy to kill, Oh! for a, xii. 285.
European, when he has cut off his beard, If an, etc., vi. 157 n.
Even from the tomb, etc., vi. 120; xii. 159.
Even then (admire, John Bell! my simple ways), iv. 305 n.
even to o’erflowing, ix. 382.
even when he killed a calf, xii. 336.
ever charming, ever new, viii. 352.
ever lifted leg, viii. 11.
ever strong, upon the stronger side, etc., xii. 459.
every good work reprobate, to, vii. 135; x. 235.
Every moment brings, etc., iii. 207.
everything by starts, and nothing long, i. 104.
everything by turns and nothing long, xi. 515.
every variety of untried being, i. 23.
every time we called for bread, and, xii. 142.
evidence of things unseen, the, x. 86.
Evident to any one who takes a survey, it is, etc., xi. 101.
Ex uno omnes, vii. 51; viii. 366.
exact scale, according to an, viii. 93.
exaggerated evils, iii. 209.
Examines his own mind and finds nothing there, etc., vi. 124.
excellencies bear to be united, Some, etc., vi. 143.
Excellent Brutus, viii. 59.
Exchange the shepherd’s frock of native grey, etc., i. 113.
Excise, monster, iii. 465.
exhalation, Like an, etc., xii. 261, 292.
expatiates freely there, v. 102.
exploded author, that, xi. 287.
extravagant and erring spirit, vii. 16; x. 145.
Extremes meet, This is the only way of, etc., i. 97–8.
exuberant strength of my argument, iv. 21.
eye to look at, not to look with, ix. 34; xii. 354.
eye offend thee, If thine, etc., xii. 305.
eye, with lack-lustre, xii. 31, 59.
eye-judging sex, an, xii. 436.
eyelids many graces sat, Upon her, etc., x. 83, 348.
eye-pleasing flowers, v. 323.
eyes and see them, have, vi. 159.
eyes, in their arms, in their, etc., i. 45; xi. 273.
eyes of youth, x. 391.
eyes shall see me, All, ix. 69; viii. 148; x. 191.
eyes, with sparkling, etc., xii. 43.
F.
Fables for the Holy Alliance, iv. 360.
face to face, etc., xii. 43.
face was as a book, his, etc., xii. 271.
facilis descensus Averni, iii. 161.
fade by degrees into the light of common day, they, i. 250.
faded to the light of common day, ix. 62.
fænum in cornu, ix. 244.
Fain would I to be what our Dante was, etc., ix. 394; xi. 202.
faint shadow of uncertain light, Like a, vi. 113.
Fair, and of all beloved, I was not fearful, etc., v. 213.
fair clime, the lonely herdsman stretch’d, In that, etc., i. 114.
Fair moon, who with thy cold and silver shine, etc., v. 299.
Fair Semira, viii. 248.
Fair variety of things, the, ix. 332.
fairest of the fair, xii. 61.
fairest princess under sky, vi. 238; x. 242.
Fairfax and the starry Vere, vii. 232.
Fairy elves beyond the Indian Mount, etc., v. 274.
faithful remembrancers of his high endeavour, etc., vii. 430; xii.
116.
Fall blunted from the indurated breast, iv. 274.
fall degrades, But ’tis the, etc., iii. 46; vii. 368; xi. 475.
fall into misfortune, xi. 349.
fallacy, In terms a, etc., xii. 113.
Fall’n was Glenartny’s stately tree, etc., xii. 324.
false, sophistical, unfounded, etc., iii. 370.
famous for the keeping of it up, v. 131.
famous poet’s page, iv. 346; ix. 178; x. 243.
famous poet’s pen, ix. 178.
famous poet’s verse, x. 243.
famous poet’s wit, i. 23.
Fancy was a truant ever, Th’ enthusiast, vi. 72.
fancies and good-nights, xii. 224, 285.
fanciful chimeras, such, etc., iv. 282.
far darting eye, viii. 180.
far from the madding strife, vi. 100.
far from the sun and summer gale, iv. 266.
farce is over, now let us go to supper, The, vi. 150.
fared sumptuously every day, iv. 150.
farthest from them is best, iv. 261.
fashion of an hour mocks the wearer, The, etc., xi. 438.
fat and fair a bird, and how, etc., vii. 303.
fate and metaphysical aid, viii. 378.
Fate, I follow, etc., xii. 3.
father of lies, the, x. 327.
fault, it was ever the, etc., iii. 55.
faultless monsters which the world ne’er saw, Those, i. 434; ii. 129;
iv. 224; vi. 263; viii. 429; ix. 129; xii. 60.
Faunus, this Granuffo is a right wise good lord, etc., v. 226.
favours secret, sweet and precious, i. 372; viii. 14.
Fear God, and honour the King, iii. 282.
Fear God, my dear Abner, etc., ix. 116.
fear no discipline of human wit, iii. 63; xii. 378.
fear of being silent strikes us dumb, The, etc., vii. 32.
feast of reason, the, and the flow of soul, ii. 10; xii. 42, 153.
feathered, two-legged things, vii. 5.
fee-grief, due to the poet’s breast, some, vi. 174.
feel is to judge, to, xi. 85.
feel what others are and know myself a man, vii. 55.
felicity, the throne of, xii. 121.
felicity can fall to creature? What more, etc., vii. 181; xii. 2, 200.
fell of hair is likely to rouse, at which our, etc., viii. 127.
fell opposite the, viii. 356.
fell stillborn from the press, vi. 65.
fellow Burke were here now, he would kill me, If that, viii. 103.
felt a stain like a wound, v. 267; viii. 289.
Ferrara! in thy wide and grass-grown streets, xi. 424.
Few (of the University) pen plays well, etc., v. 282.
Fiat justitia, ruat cœlum, viii. 440.
Fideliter didicisse ingenuas artes, etc., vii. 235.
Fie, Sir! O fie! ’tis fulsome, xi. 419.
fields his study, nature was his book, the, vi. 181.
fierce with dark keeping, vii. 182, 278; xi. 27, 164.
fiery ordeal, x. 370.
Fiery soul that working out its way, viii. 344, 378; ix. 363; x. 393;
xi. 351.
fight, The, the fight’s the thing, etc., xii. 1.
figures nor no fantasies, They have no, xii. 5, 263, 299, 379.
finds an apple, A man, etc., vii. 176.
fine by degrees, and beautifully less, v. 359; ix. 42; xi. 386.
fine fretwork he makes of their double and single entries, iv. 364.
fine oleaginous touches of Claude, ix. 35.
fine summer evenings, when in the, they saw the frank, noble-
minded enthusiast, etc., v. 363.
fine word Legitimate, iii. 284, 293.
finical speech, a, iv. 281.
fire hot from Hell, xii. 281.
fire in the room, there was a, vi. 382.
First-born of Chaos who so fair did come, etc., viii. 58.
First come, first served, i. 53.
first garden of my innocence, that, vi. 257.
first it may be demanded, etc., But, viii. 26.
first of these is the extreme affection of two extremities, etc., The,
v. 331.
first sprightly runnings, The, i. 8; viii. 97.
first was Fancy, like a lovely boy, The, etc., v. 40.
fishing rod was a stick with a hook, a, etc., vii. 161.
fishy fume, ix. 214.
fitter for heaven, he is the, viii. 269.
Fix your eye here, etc., vii. 53.
flames in the forehead, etc., xii. 169.
flat as the palm of one’s hand, as, xi. 283.
flattery that soothes the dull cold ear, the, etc., vii. 206.
Flavia the least and slightest toy, etc., ix. 147.
fleecy fools, vi. 7.
flesh and fortune shall serve, as the, xii. 304.
flies of a summer, as the, iii. 284; vii. 234.
flocci-nauci-pili-nihili-fication, iii. 33, 231, 313; xii. 169.
Flushed with a purple grace, etc., iv. 276.
fluttering the proud Salopians, etc., xii. 259.
fly high, do we not, v. 240.
fly that sips treacle, The, is lost in the sweets, v. 129, 301; vi. 96; xii.
121.
followed in the chase, etc., xii. 272.
following things are all essential to it, the, etc., xi. 68.
Follows so the ever-running sun, etc., xii. 5.
fond deceit, And let us nurse the, etc., vi. 251.
food for the critics, viii. 223.
food whereon it lives, the very, xii. 374.
Foolish daughters of Pelias, etc., xi. 46.
fools aspiring to be knaves, iii. 67.
fools rush in where angels fear to tread, ii. 366; v. 346; ix. 480; xii.
70.
foot, an hand, an eye from Nature drawn, a, etc., v. 215.
foot of fire, with the, vi. 161.
foot mercurial, His, etc., xii. 277.
for a song, xi. 435.
For after I had from my first years, etc., v. 57.
For alas! long before I was born, etc., vi. 417.
For as much as nature hath done her part in making you a
handsome, likely man, etc., v. 284.
For her dear sake, That loves the rivers’ brinks, etc., v. 255.
For how should the soul of Socrates, etc., vii. 72.
For I am nothing if not critical, viii. 170.
For that other loss, etc., i. 118.
For this medicine, etc., v. 278.
For ’tis my outward soul, etc., viii. 52.
For true no-meaning puzzles more than wit, i. 139; viii. 552.
For wit is like a rest held up at tennis, etc., vii. 42.
For whom the merry bells had rung, v. 88.
For women, born to be controll’d, etc., vii. 203.
forehead, Her ivory, full of bounty brave, i. 69.
forerunner of the dawn, a, vi. 169.
forget the things that are behind, etc., vii. 167.
Forgive me, Now I turn to thee, thou shadow Of my contracted
lord, etc., v. 272.
form and motion so express, in, etc., xii. 248.
Fortune’s fools, vi. 460.
fortune swells him, His, etc., viii. 274.
fortune, Who shall go about to cozen, etc., xii. 297.
Forum wait for us, Let the, etc., viii. 456.
found him poor, etc., iii. 217.
fountain of blood, iii. 6.
foxes have holes, and the birds of the air, The, etc., vi. 120.
frailty, very name is, x. 397.
France, restored and shaking off her chain, iii. 51.
Franciscan think to pass, And in, etc., iii. 267.
fraught with potential infidelity, x. 127.
free born Roman maid, the, viii. 457.
Free from the Sirian star, etc., vi. 211.
French have a fault, If the, etc., vi. 307; ix. 113.
Frenchman’s darling, ix. 159.
friend in my retreat, a, etc., vi. 181.
friend in your retreat, A, etc., xii. 321.
friendly man will show himself friendly, A, etc., vii. 238.
friendship of the good, The, etc., iii. 110.
From discontent grows treason, And on the stalk of treason, death,
v. 208.
from grave to gay, from lively to severe, v. 32.
from her fair head for ever and for ever, v. 73.
From injuries to arms, and from arms to liberty, iii. 424.
From that abstraction I was roused, and how, etc., i. 117.
From that hour that Disciple took her to his own home, v. 184.
From the sublime to the ridiculous, there is but one step, viii. 23,
159.
From Windsor’s heights the expanse below, vii. 13.
From worldly care himself he did esloine, etc., xi. 333.
frozen winter and the pleasant spring, the, etc., xii. 124.
full eyes and fair cheeks of childhood, the, viii. 405.
full of matter, vi. 52.
full solemne man, a, iii. 311; xi. 413.
full to overflowing, x. 286.
full volly home, viii. 302.
fuller’s earth that takes out all stains, the true, xi. 547.
fumbling for their limbs, v. 359.
Fundamental principle of the modern philosophy is the opinion,
etc., xi. 100.
furnishing matter for innocent mirth, and, viii. 36.
fury in that Gut, there is some, viii. 304.
G.
gain but glory, iii. 259.
gain new vigour, etc., xii. 156.
Gallaspy was the tallest and strongest, etc., i. 55.
garlanded with flowers, ix. 145.
Garrit aniles ex re fabellas, iii. 419; iv. 237.
gather grapes of thorns nor figs of thistles, i. 249; vii. 200.
gaudy-days, xi. 360.
gauger of ale-firkins, a, v. 131.
Gay, sprightly land of mirth and social ease, etc., ix. 93.
gayest, happiest attitude, the, etc., viii. 41; ix. 426.
generation of actors binds another, no one, viii. 384.
generations, the, were prepared, the pangs, etc., v. 67, 235.
generous friendship no cold medium knows, A, etc., iv. 263; vi.
253.
Genius is naturally a truant, etc., vii. 59.
Genius was the child of the imitation of others, etc., vi. 127.
Genius, you must have no dependence on your own, xi. 213.
gentle craft, the, v. 302.
gentle husher, vanity by name, a, etc., vi. 289; ix. 196; x. 121; xi.
555.
gentleman and man of honour, iii. 178, 181.
Gentlemen, I can present, etc., viii. 275 n.
germain to the matter, more, xii. 239.
Gertrude’s eyes, Till now, in, etc., iv. 346.
ghost of one of the old kings of Ormus, v. 231.
Giace l’alta Cartago, etc., x. 71.
giant form roll before him in the dust, seeing his, etc., viii. 344.
giddy raptures, with all its, vii. 227.
Give a dog a bad name and hang him, iv. 1; ix. 245.
give a reason for the faith that was in me, v. 302; xii. 396.
Give me the thing and I will readily give up the name, xi. 65.
give his own little Senate laws, vii. 272.
give sorrow words, the grief that does not speak, etc., vi. 39.
give to any man without compulsion, to, xi. 419.
give up a kingdom for a mass, x. 363.
give us reason with his rhyme, vii. 371.
given in the furnace of our palace, v. 279.
gives a body to opinion, it, etc., vii. 266.
gives evidence of it, viii. 424.
gladdened life, and whose deaths eclipsed the gaiety of nations, i.
157; viii. 387, 526.
glades mild-opening, etc., xii. 202.
gladiatorship, in intellectual, viii. 84.
gladly would he learn, and gladly teach, etc., iv. 285.
glares round his soul, and mocks his closing eyelids, vii. 76; xii.
204.
glass darkly, as in a, vi. 9; xii. 152.
Glorious John, xi. 535.
glimmer, and now in gloom, now in, vii. 368; xi. 424.
glimpses that make him less forlorn, iii. 275.
Gli occhi di ch’io parlai, x. 65 n.
glittered green with sunny showers, vi. 186.
glittering bride, becomes his, etc., iii. 160; vii. 279.
glory hereafter to be revealed, the, vii. 261.
glory, the, the intuition, the amenity, vii. 120.
Glory to God, etc., iii. 266; xi. 413.
gnarled oak, the, xi. 508.
gnawed too much on the bridle, iv. 279.
gnawing the skull of his adversary, etc., ix. 401.
Go, go, you’re a censorious ill man, i. 392.
go seek some other play-fellows, v. 42.
Go thou and do likewise, vi. 164; xi. 410.
Go thy ways, old world, etc., vi. 328.
Go! you’re a censorious ill woman, viii. 78.
goes sounding on his way, iv. 214; xii. 265.
goes to church in a coranto, etc., xii. 57.
going into the wastes of time, ii. 350.
God Almighty’s gentlemen, vii. 219; viii. 85.
God knew Adam in the elements of his chaos, xi. 572.
God made the country, etc., iv. 226.
God save the King, viii. 298; ix. 93.
God the Father turns a school-divine, v. 63.
Gods have eyes but they see not, Your, etc., xii. 244.
Gods of his idolatry, the, xii. 72.
Gods partial, changeful, etc., xii. 245.
God’s image carved in ebony, xii. 392.
God’s viceregent upon earth, i. 130; x. 363.
Gog’s crosse, Gammer, etc., v. 287.
golden age, in the, v. 297.
golden mean, iv. 253.
Goldsmith of the stars, the, v. 300.
good, they did it for his, vii. 208.
good clever lad, etc., iii. 68.
good haters, i. 103, 374 n.; vii. 180; viii. 269; ix. 122.
good, he means, bad fortune, xi. 387.
good-humoured fellow, Now I think I am a, viii. 103.
good king, A, should be ... a mere cypher, etc., xii. 243.
Good lord, that there are no fairies, etc., vi. 167 n.
good-nature is a fool, mere, vii. 78.
good of the country, for the, vii. 375.
good old times, iv. 249; xi. 197.
good picture and a true, a, xi. 245.
goodly sight, It was a, to sally out from his castle, etc., i. 87.
goose pie, In form resembling a, ix. 71; xi. 200.
gorge the little fame, they get all raw, They, ix. 356.
gorge rises, our very, xii. 126.
gospel is preached to the poor, iv. 295.
gossamer that idles in the wanton summer air, the, x. 44.
Gothic cathedral ... like a petrified religion, a, vi. 369.
grace above, All is, etc., viii. 402.
graceful ornament to the civil order, etc., viii. 70.
graceful ornaments to the columns, the, etc., vii. 205.
Gracious and sweet was all he saw in her, vi. 346.
grand caterers and wet-nurses of the State, etc., ix. 24.
grandeur in it, there was a, vii. 303.
Grant I was tempted: Condemn you me, for that the Duke did love
me, etc., v. 241.
grant me judgement, you, xii. 360.
grapes of thorns, You cannot gather, etc., i. 249; vii. 200.
great book is a great evil, A, v. 114; xi. 244.
great discoverers obtain, How, shall our, i. 115.
Great Divan, the nation’s, xi. 336.
great grandmother without grey hairs, a, viii. 160.
Great is Diana of the Ephesians, xi. 603; xii. 244.
great lords and ladies do not like to have their mouths stopped,
Because, vi. 301.
great man’s memory may outlive him half a year, i. 146.
great princes have great playthings, etc., iii. 243.
Great Vulgar and the Small, i. 324; ii. 18; v. 56; vi. 157; viii. 463,
518; ix. 391, 428; xi. 437.
Great wits to madness nearly are allied, x. 231.
Greater love than this hath no man, etc., xii. 99.
greater the sinner, The, etc., xii. 330.
greatest happiness to the greatest numbers, the, vii. 180, 182, 184,
185, 193.
green-eyed, spring-nailed, etc., xi. 530.
See demure.
green upland swells that echo to the bleat of flocks, vi. 186.
Grieve not for me, etc., vi. 327.
grim-visaged comfortless despair, vii. 260.
grinding law of necessity, iv. 66, 295; vii. 193, 374.
grinding the faces of the poor, iv. 2.
grinned horrible a ghastly smile, etc., xii. 11.
grinning scorn a sacrifice, To, etc., xi. 525.
grotesque ornament to the civil order, i. 46 n.
ground, however unsafe, On this, etc., vi. 128.
grove, The, Grew dense with shadows, etc., x. 264.
Grove nods to prove each alley has a brother, etc., xi. 472.
grows with our growth, etc., vii. 60; x. 336.
guide, the anchor, the, etc., iii. 211.
guide, the stay, the, etc., iv. 205.
Guido from a daub, a, ix. 480.
Guido, from want of choice, etc., vi. 139.
Guido Reni from a prince-like affluence of fortune, etc., vi. 20.
guinea and the gallows, xi. 288, 472.
guns, drums, trumpets, viii. 403; xi. 532.
H.
habit; there is nothing so true as, vi. 33; viii. 124; x. 42; xii. 398.
Had I foreknown his death as you suggest, etc., v. 241.
Had I a heart for falsehood framed, viii. 165.
Had Petrarch gained his Laura for a wife, etc., vii. 112.
Had we but world enough and time, This coyness, Lady, were no
crime, etc., v. 314.
Hæ nugæ in seria ducunt, xi. 442.
Hæret lateri lethalis arundo, i. 135; viii. 22.
Hail, adamantine Steel! etc., xi. 505.
hail-fellow well met, v. 294.
hair-breadth ’scapes, xii. 17.
hair on end, at his own wonders, with his, etc., vi. 295.
Half thy malice youth could bear, viii. 166.
halfpenny head, having a, etc., vi. 431.
haloo an anthem, xii. 349.
hand, an ear, an eye, a, xi. 484.
hand had done, whatever the, etc., ix. 420.
hands that the rod of empire had swayed, etc., vi. 14.
handsome as you, I was never so, etc., viii. 114.
hand-writing on the wall, the, viii. 144; ix. 129.
Hang both your greedy ears upon my lips, etc., v. 208.
hang upon the beatings of my heart, vi. 257; ix. 107.
hanging locks, Like to those, etc., viii. 159; ix. 47.
Hanover rats, vi. 221 n.
happy alchemy of mind, i. 65; v. 107; viii. 408.
Happy insect, what can be, etc., viii. 59.
happy things in marriage are allowed, Two, etc., i. 68.
happy warrior, xi. 327.
hardest stone, the, etc., iii. 261.
See melancholy.
hard to say if greater want of skill, ’Tis, etc., viii. 401 n.
Hark! ’tis the twanging horn, etc., xii. 240.
Harlot old, that, etc., iii. 36, 177.
hart panteth for the waterbrooks, as the, vii. 226, 307.
hashed mutton, Amelia’s, xii. 141, 327.
has just come into this breathing world, xii. 162.
Has she not gone, trowest now thou, and lost her neele? etc., v.
287.
Hast oft been chased, etc., xi. 132, 186.
Hast thou seen the down in the air? etc., viii. 56.
hate, all we, ix. 340.
hate to fill a book with things, I, etc., vii. 399.
hated, not to be, viii. 332.
hated, needs but to be seen, which to be, etc., viii. 288.
hates conchology, he, etc., iv. 277.
hath a devil, ix. 59.
haut et puissant prince, agé d’un jour, un, viii. 176.
Have I not seen the household where love was not? xii. 88 n.
have proved a monument, i. 125.
have their hands full of truths, iv. 310.
Have ye not seen sometime a pale face, etc., v. 21.
Have you felt the wool of the beaver, etc., v. 322.
He could not read them in his old age, viii. 14.
He finds himself possessed of no other qualifications ... than what
mere common observation, etc., vi. 124.
He had received it from his grandmother, etc., viii. 228.
He hath a demon, v. 153.
He instanced it too in Lord Peterborough, vii. 209.
He is indeed a person, iii. 67.
he is one that cannot make a good leg, etc., vii. 25.
He is owner of all he surveys, vii. 68.
He is ten times handsomer, etc., viii. 442.
He looks up with awe to kings, xi. 515.
He might if he had pleased have married, i. 55.
he must rank, as a universal genius, above Dryden, etc., v. 123.
He never is—but always to be wise, iii. 139; vi. 148; ix. 249.
He openeth his hands, etc., vi. 392.
He prized black eyes, v. 189; vii. 207 n.
he saw nature in the elements of its chaos, etc., v. 341 n.
He sent a shaggy, tattered, staring slave, etc., v. 210 n.
He so teased me, viii. 323.
He takes most ease, and grows ambitious Thro’ his own wanton
fire and pride delicious, v. 254.
He that is but able to express, etc., vi. 207.
He that of such a height, hath built his mind, etc., v. 309.
he was a fine fellow once, xii. 145.
he was a fine old mouser, vi. 347.
He went up into the mountain to pray, Himself, alone, and, iii.
152.
he who knows of these delights to taste, etc., vi. 173.
he’s but his half brother, viii. 74.
head to the East, Nay, nay, lay my, iv. 248; viii. 146 n.
heaping coals of fire, etc., x. 360.
hear a sound so fine, there’s nothing lives ’twixt it and silence, etc.,
vii. 40.
hear the loud stag speak, xii. 269.
heard it, but he heeded not—his eyes, ix. 165 n.
hears it not, his thoughts are far away, He, etc., ix. 234.
hears the tumult, and is still, He, i. 338; v. 90; vi. 91.
heart of hearts, yea, into our, xii. 177.
heart of man is deceitful, the, etc., xii. 304.
hearts unkind, I’ve heard of, iii. 172; xi. 515.
heaven and all its host, he shall not perish, By, etc., viii. 307.
Heaven lies about us in our infancy, i. 250; x. 358.
Heaven, nigh-sphered in, v. 51; xii. 33.
Heaven of Invention, vi. 219.
heaven-born genius, x. 178.
Heav’n’s chancel-vault is blind with sleet, while, vi. 90.
heaves no sigh and sheds no tear, i. 135; v. 30.
he! jam satis est! iv. 305 n.
Hebrew roots, although they’re found, For, etc., viii. 64.
held on their way, etc., xii. 45.
hell of waters, A, xi. 424.
Hell was paved with infants’ skulls, vi. 76, 364; vii. 243.
hem was then heard, consequential and snapping, A, etc., i. 377.
Hence, all you vain delights, v. 295.
Her armes small, her back both straight and soft, i. 227.
Her eyes are fierce, etc., viii. 448.
Her finger was so small, the ring, etc., viii. 56.
Her full dark eyes are ever before me like a sea, like a precipice, i.
70.
Her heroes have no character at all, xii. 64.
Her voice, the music of the spheres, etc., viii. 63.
her whose foot was never off the stair, vii. 319.
Her’s is the afflicted, vi. 363.
herb that would cure him, The, xi. 328.
Here and hereafter, if the last may be? xii. 115.
Here are all that ever reigned, xi. 234.
Here be truths dashed and brewed with lies, vii. 140; x. 235.
Here be woods as green As any, air likewise as fresh and sweet,
etc., v. 254; vi. 183.

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Answers to Review Questions

Learning Objective: 18-01

Learning Objective: 18-01

3. It is important to adjust for inflation when comparing nominal quantities at different

Learning Objective: 18-02

Learning Objective: 18-02

5. First, quality adjustment bias occurs when government statisticians underestimate

Learning Objective: 18-03

Learning Objective: 18-04

Learning Objective: 18-05

Learning Objective: 16-05

Learning Objective: 18-01

Learning Objective: 18-02

Family income Tax rate

Learning Objective: 18-02

In 2016, the cost is $150 + $70 + $80 = $300.

Learning Objective: 18-01; 18-03

Gasoline Real Percentage change

Learning Objective: 18-05

9. a. Inflation is expected to be (110-100)/100 = 10% in the first year and (121-

Learning Objective: 18-05

Learning Objective: 18-05

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