M Eco 2013 2nd Gord Rul X P Tak a Test C Hepburn Google Chrome C D openve e http

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M Eco 2013 2nd Gord Rul X P Tak a Test C Hepburn Google Chrome C D openve e https:// 136670024 &centerwin; yes www.mathxl.com/Student/PlayerTest.aspx?testld Carla Hepburn & I 7/5/16 5:08 PM ECO 2013 Summer B2016 TR 8am Quiz QUIZ 2 GDP and Unemployment Time Remaining: 01:08:08 Submit Quiz MyEconLab This Question 1 p This Quiz: 20 pts possible 3 of 20 (7 complete e Calendar Main Menu Assignments The monthly market basket for consumers consists of pizza shirts, and rent Do Homework The table below shows market basket quantities and prices for the base year Year 1) and in the following two years. Base Year (Year 1) Price in the Price in Price in Product Year 3 Quantity Base Year Year 2 Take a Quiz/Test $3.00 $3.75 $4.05 Pizza T-Shirts $25.00 $22.50 $26.25 $400.00 Rent $440.00 $500.00 The inflation rate between Year 1 and Year 2 is Round both answers to one decimal place radebook The inflation rate between Year 2 and Year 3 is Score see score see score Enter your answer in each of the answer boxes. Ask me anything 5.09

Explanation / Answer

Inflation rate = Change in CPI across years.

Cost of basket, year 1 = (15 x $3) + (2 x $25) + (1 x $400) = $(45 + 50 + 400) = $495

So, $495 corresponds to index value of 100 (base year CPI = 100).

CPI, year 2 = [(15 x $3.75) + (2 x $22.5) + (1 x $440)] x 100 / $495 = $[(56.25 + 45 + 440)] x 100 / $495

= $541.25 x 100 / $495

= 109.34

CPI, year 3 = [(15 x $4.05) + (2 x $26.25) + (1 x $500)] x 100 / $495 = $[(60.75 + 52.5 + 500)] x 100 / $495

= $613.25 x 100 / $495

= 123.89

So,

Inflation rate between year 1 & 2 = (109.34 / 100) - 1 = 1.093 - 1 = 0.093, or 9.3%

Inflation rate between years 2 & 3 = (123.89 / 109.34) - 1 = 1.133 - 1 = 0.133, or 13.3%

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