**Understanding the Consumer Price Index (CPI) with Hanna's Meals**Hanna, who is a 5-year-old girl, eats nothing but pasta, yogurt, and lemonade. Each month her parents buy 19 pounds of pasta, 53 packages of yogurt, and 9 bottles of lemonade. These three items make up a basket of goods and services similar to the much larger basket used by the Bureau of Labor Statistics (BLS) when computing the official Consumer Price Index (CPI). The table below lists the average price for each item in this basket for the past four years.### Hanna's Meals| Year | Pasta (dollars per pound) | Yogurt (dollars per package) | Lemonade (dollars per bottle) ||------|-----------------------------|------------------------------|-------------------------------|| 1 | $1.96 | $0.94 | $1.86 || 2 | $1.78 | $1.04 | $2.08 || 3 | $1.62 | $1.04 | $1.83 || 4 | $1.47 | $1.14 | $1.88 |### Instructions**Round your answers to two decimal places.****a. For each year, calculate the CPI, using year 1 as the base year.**- **In year 1, the CPI was .**- **In year 2, the CPI was .**- **In year 3, the CPI was .**- **In year 4, the CPI was .****b. For each year, calculate the CPI, using year 3 as the base year.**---### Explanation for Calculating CPI:The Consumer Price Index (CPI) is calculated by taking the price of each item in the current year, multiplying it by the quantity of that item, and then summing these values to get the total cost of the basket. This total is then compared to the cost of the basket in the base year, and the ratio is multiplied by 100 to get the index number.1. **Determine the total cost of the basket for each year**: - Total Cost = (Price of Pasta * Quantity of Pasta) + (Price of Yogurt * Quantity of Yogurt) + (Price of Lemonade * Quantity of Lemonade). 2. **Instructions:** Round your answers to two decimal places.a. For each year, calculate the CPI, using year 1 as the base year.- In year 1, the CPI was ____.- In year 2, the CPI was ____.- In year 3, the CPI was ____.- In year 4, the CPI was ____.b. For each year, calculate the CPI, using year 3 as the base year.- In year 1, the CPI was ____.- In year 2, the CPI was ____.- In year 3, the CPI was ____.- In year 4, the CPI was ____.**Table Data:**| | $1.96 | $0.94 | $1.86 ||----|-------|-------|-------|| 2 | 1.78 | 1.04 | 2.08 || 3 | 1.62 | 1.04 | 1.83 || 4 | 1.47 | 1.14 | 1.88 |**Explanation of the Table:**The table represents prices of three items (denoted by $1.96, $0.94, and $1.86 for year 1; $1.78, $1.04, and $2.08 for year 2; $1.62, $1.04, and $1.83 for year 3; and $1.47, $1.14, and $1.88 for year 4) over four different years. You will use this data to calculate the Consumer Price Index (CPI) for each year, using specified base years.

As requeseted, year 1 is considered as the base year. Quantities are given as 19 pounds of pasta,…

1 2 3 4 $1.96 1.78 1.62 1.47 $0.94 1.04 1.04 1.14 $1.86 2.08 1.83 1.88 Instructions: Round your answers to two decimal places. a. For each year, calculate the CPI, using year 1 as the base year. In year 1, the CPI was In year 2, the CPI was In year 3, the CPI was In year 4, the CPI was b. For each year, calculate the CPI, using year 3 as the base year. In year 1, the CPI was In year 2, the CPI was

1 2 3 4 $1.96 1.78 1.62 1.47 $0.94 1.04 1.04 1.14 $1.86 2.08 1.83 1.88 Instructions: Round your answers to two decimal places. a. For each year, calculate the CPI, using year 1 as the base year. In year 1, the CPI was In year 2, the CPI was In year 3, the CPI was In year 4, the CPI was b. For each year, calculate the CPI, using year 3 as the base year. In year 1, the CPI was In year 2, the CPI was

Economics (MindTap Course List)

13th Edition

ISBN:9781337617383

Author:Roger A. Arnold

Publisher:Roger A. Arnold

Chapter6: Macroeconomic Measurements, Part I: Prices And Unemployment

Section6.1: Measuring The Price Level

Problem 1ST

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