A 5125 Percent TIPS Has an Original Reference CPI of 191

question 118

Multiple Choice

A 5.125 percent TIPS has an original reference CPI of 191.8. If the current CPI is 188.3, what is the par value of the TIPS?

• A) $981.75
• B) $1,018.60
• C) $992.75
• D) $1,042.95

---

Definitions:

Long Run

A period of time in which all factors of production and costs are variable, allowing for adjustment to changing market conditions.

Short Run

A time period in which at least one input is fixed, limiting the adjustments that a firm can make to its production.

Binding Price Ceiling

A binding price ceiling is a government-imposed limit on the price charged for a product that is set below the market equilibrium price, leading to shortages.

Tax

A financial charge imposed by the government, required for the support of the government and public services.