$20.00 $22.00 4.20 Haircuts 2 $25.00 Hamburgers 10 4.00 4.50 DVDS 6 15.00 15.00 14.00 a. Calculate the Consumer Price Index (CPI) in 2016, 2017 & 2018. Assume that 2016 is the base year b. Calculate the inflation rate in 2018
$20.00 $22.00 4.20 Haircuts 2 $25.00 Hamburgers 10 4.00 4.50 DVDS 6 15.00 15.00 14.00 a. Calculate the Consumer Price Index (CPI) in 2016, 2017 & 2018. Assume that 2016 is the base year b. Calculate the inflation rate in 2018
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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![Question 4)
below, data regarding typical household consumption are shown for three different years:
2016, 2017 and 2018.
Consider a simple economy in which there are only three products. In the table
2016
2017
2018
(BASE YEAR)
PRODUCT
QUANTITY
PRICE
PRICE
PRICE
Haircuts
2
$20.00
$22.00
$25.00
Hamburgers
10
4.00
4.20
4.50
DVDS
6.
15.00
15.00
14.00
a. Calculate the Consumer Price Index (CPI) in 2016, 2017 & 2018. Assume that 2016 is
the base year
b. Calculate the inflation rate in 2018
Question 5) The paradox of inflation and cost of living.
Even prior to the current pandemic and the consequent economic toll, Australian
households were reportedly grappling with "rising costs of living". Households' budgets
were increasingly squeezed as costs rose significantly while income could not catch up.
This, however, stands in stark contrast with the reported inflation rate. Inflation rate has
remained noticeably low, not exceeding 2.1% for every single quarter since 2015. This
indicates only slight increases in prices.
If inflation is indeed the measurement for changes in prices as it appears to, why have
Australians faced a "cost of living" problem while the inflation rate has been very
modest?](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fb20a9511-c200-49d7-b703-b4e6d8d866a6%2F200e2ef2-3755-44a5-b20e-9039825979a0%2Fblj0yn_processed.jpeg&w=3840&q=75)
Transcribed Image Text:Question 4)
below, data regarding typical household consumption are shown for three different years:
2016, 2017 and 2018.
Consider a simple economy in which there are only three products. In the table
2016
2017
2018
(BASE YEAR)
PRODUCT
QUANTITY
PRICE
PRICE
PRICE
Haircuts
2
$20.00
$22.00
$25.00
Hamburgers
10
4.00
4.20
4.50
DVDS
6.
15.00
15.00
14.00
a. Calculate the Consumer Price Index (CPI) in 2016, 2017 & 2018. Assume that 2016 is
the base year
b. Calculate the inflation rate in 2018
Question 5) The paradox of inflation and cost of living.
Even prior to the current pandemic and the consequent economic toll, Australian
households were reportedly grappling with "rising costs of living". Households' budgets
were increasingly squeezed as costs rose significantly while income could not catch up.
This, however, stands in stark contrast with the reported inflation rate. Inflation rate has
remained noticeably low, not exceeding 2.1% for every single quarter since 2015. This
indicates only slight increases in prices.
If inflation is indeed the measurement for changes in prices as it appears to, why have
Australians faced a "cost of living" problem while the inflation rate has been very
modest?
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