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Suppose people consume 3 different goods. The following table shows the prices and quantities of each good consumed in 2006, 2007, and 2008.

Year Price of Pizza Quantity of Pizza Price of Burger Quantity of Burger Price of coffee Quantity of Coffee
2006 $ 4 200 $ 6 125 $ 8 100
2007 $ 6 350 $ 8 200 $ 9 175
2008 $ 7 600 $ 9 350 $ 12 250

 

a) Calculate the rate of inflation for 2007 and 2008 using the GDP deflator as your price index. Assume that 2006 is still the base year.

b) Using the quantities from 2006 for your market basket, and 2006 as your base year, calculate the CPI for 2006, 2007 and 2008.

c) Using the CPI calculate the rate of inflation.

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Lorem Ipsum has been the industrys standard dummy text ever since the 1500s, when an unknown printer took a galley of type and scrambled it to make a type specimen book.

Lorem Ipsum has been the industrys standard dummy text ever since the 1500s, when an unknown printer took a galley of type and scrambled it to make a type specimen book. It has survived not only five centuries, but also the leap into electronic typesetting, remaining essentially unchanged.