1a. The CPI is used to measure the cost of a typical basket of goods. The typical household in the Global-Land buys 4 loaves of bread, 3 pounds of cream cheese, and 8 books each week. The prices of these goods in years 2021, 2022, and 2023 and given in the table below: YEAR Price of a Price of a pound Price of loaf of bread of cream chesse a book 2021 $1 $3 $10 2022 $2 $6 $20 2023 $3 $6 $25 b. Calculate the CPI in 2023 using 2022 as the base year. c. Calculate the CPI in 2021 using 2016 as the base year. d. Calculate the rate of inflation between 2021 and 2022. e. Calculate the rate of inflation between 2022 and 2023. f. Describe a reason why the inflation rate between 2016 and 2017 might overstate changes in the cost of living.
1a. The
|
YEAR |
Price of a |
Price of a pound |
Price of |
|
|
loaf of bread |
of cream chesse |
a book |
|
2021 |
$1 |
$3 |
$10 |
|
2022 |
$2 |
$6 |
$20 |
|
2023 |
$3 |
$6 |
$25 |
b. Calculate the CPI in 2023 using 2022 as the base year.
c. Calculate the CPI in 2021 using 2016 as the base year.
d. Calculate the rate of inflation between 2021 and 2022.
e. Calculate the rate of inflation between 2022 and 2023.
f. Describe a reason why the inflation rate between 2016 and 2017 might overstate changes in the cost of living.
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