Refer to the following table. Suppose the CPI basket consists of 10 pies of pizza and 20bottles of milk respectively, and 2020 is the base year.YearPrice of pizzaPrice of milk2020$250$402021$280$45а.Calculate the CPI in 2020 and 2021 respectively. What is the inflation rate in 2021?b. Suppose the minimum wage is $37.5 per hour in 2020, how much would it be in 2021 inorder to maintain the same purchasing power in 2020?.С.Which one do you think is a better measure of a household's cost of living, CPI or GDPdeflator? Why?*

The consumer price index (CPI) is the price index of goods and services purchased by the consumer.…

Refer to the following table. Suppose the CPI basket consists of 10 pies of pizza and 20 bottles of milk respectively, and 2020 is the base year. Year Price of pizza Price of milk 2020 $250 $40 2021 $280 $45

Refer to the following table. Suppose the CPI basket consists of 10 pies of pizza and 20 bottles of milk respectively, and 2020 is the base year. Year Price of pizza Price of milk 2020 $250 $40 2021 $280 $45

ECON MACRO

5th Edition

ISBN:9781337000529

Author:William A. McEachern

Publisher:William A. McEachern

Chapter7: Unemployment And Inflation

Section: Chapter Questions

Problem 3.7P

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Question

Refer to the following table. Suppose the CPI basket consists of 10 pies of pizza and 20
bottles of milk respectively, and 2020 is the base year.
Year
Price of pizza
Price of milk
2020
$250
$40
2021
$280
$45
а.
Calculate the CPI in 2020 and 2021 respectively. What is the inflation rate in 2021?
b. Suppose the minimum wage is $37.5 per hour in 2020, how much would it be in 2021 in
order to maintain the same purchasing power in 2020?.
С.
Which one do you think is a better measure of a household's cost of living, CPI or GDP
deflator? Why?*

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