12. in an imaginary country, the CPI basket contains 3 hats and 8 cups of tea. U
ID: 1166595 • Letter: 1
Question
12. in an imaginary country, the CPI basket contains 3 hats and 8 cups of tea. Use 2012 as the base year. The price of a hat increased to $6 in 2013 from $4 in 2012, while the price of a cup of tea has increased from $2 in 2012 to $3 in 2013.
Using 2012 as the base year, calculate the inflation rate in 2013. , in 50 words explain how you got it
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Explanation / Answer
The GDP of that country in 2012 was 3x4+8x2=12+16=28
The GDP of that country in 2013 is 3x6+8x3=18+24=42
Inflation rate is the rate at which prices increase over time, resulting in a fall in the purchasing value of money.
Thus,the inflation rate will be (42-28)/28=14/28= 50%
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