R Exercises | Programming Exercises for Finance in the R Language

Introduction to Econometrics: Exercises

3. Real and nominal variables. The consumer price index (CPI) measures the price of a basket of goods and services over time. In this exercise, we will use the CPI to deflate the 2021 price of a barrel of oil into 2011 prices. The following variables have been defined for you: cpi_2011, cpi_2021, oil_2021.

To convert time t prices into prices in year s, we use the following adjustment:

\[ real\_price_{t} = \frac{price_{t}}{cpi_{t}} cpi_{s} \]



                                cpi_2011 <- 227.223
                                cpi_2021 <- 280.126
                                oil_2021 <- 75.33



                            # Calculate the 2021 price of oil in 2011 prices.
                            real_oil_price_2021 <- (___ / ___) * ___

                            # Print the real oil price in 2021.
                            print(___)

                            # Print nominal oil price in 2021.
                            ___(oil_2021)



                            # Calculate the 2021 price of oil in 2011 prices.
                            real_oil_price_2021 <- (oil_2021 / cpi_2021) * cpi_2011

                            # Print the real oil price in 2021.
                            print(real_oil_price_2021)

                            # Print nominal oil price in 2021.
                            print(oil_2021)


                            test_error()
                            test_object("real_oil_price_2021", incorrect_msg="Did you calculate the real oil price correctly?")
                            success_msg("Well done!")

Check the problem description for an overview of deflating prices.

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