Given the following price information for a typical market basket of goods purch

Question

Given the following price information for a typical market basket of goods purchased by consumers and assume that 2000 is the base year: :
YEAR PRICE of market basket
2000 $5
2001 $4
2002 $8
2003 $9





Calculate the price index for 2000.
Calculate the price index for 2001.
Calculate the price index for 2002.
Calculate the price index for 2003.
Calculate the rate of price change between 2000 and 2001 and label this rate as either deflation, disinflation, or hyperinflation.
Calculate the rate of price change between 2001 and 2002 and label this rate as either deflation, disinflation, or hyperinflation.
Calculate the rate of price change between 2002 and 2003 and label this rate as either deflation, disinflation, or hyperinflation.

Explanation / Answer

price index 2000 = 5/5 =100% 2001 =4/5 = 80% 2002=8/4 =200% 2003 =9/8=112.5% rate of price change 2000-2001 = 4-5 /5 =20 % (deflation) 2001 -2002 = 8-4 /4 = 100% =(hyper inflation ) 2002 -2003 =9-8 /8 = 12.5 % =(disinflation ) cheers :)

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