EBK MACROECONOMICS FOR TODAY
EBK MACROECONOMICS FOR TODAY
9th Edition
ISBN: 8220101425966
Author: Tucker
Publisher: CENGAGE L
Question
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Chapter 7, Problem 8SQ
To determine

Consumer price index.

Expert Solution & Answer
Check Mark

Answer to Problem 8SQ

Option ‘b’ is correct.

Explanation of Solution

Option (b):

Consumer price index is calculated as follows:

Consumer Price Index=Cost of baskettCost of basketb123=(4×3)+(2×10)(4×2)+(2×9)×100123=3226×100123123.07

The calculated value of consumer price index is approximately equal to the given value of 123. Thus, option 'b' is correct.

Option (a):

Consumer Price Index=Cost of baskettCost of basketb100=(4×3)+(2×10)(4×2)+(2×9)×100100=3226×100100<123.07

The calculated value of consumer price index is greater than the given value of 100. Thus, option 'a' is incorrect.

Option (c):

Consumer Price Index=Cost of baskettCost of basketb126=(4×3)+(2×10)(4×2)+(2×9)×100126=3226×100126>123.07

Here, the calculated value of consumer price index is less than the given value of 126. Thus, option ‘c’ is incorrect.

Option (d):

Consumer Price Index=Cost of baskettCost of basketb130=(4×3)+(2×10)(4×2)+(2×9)×100130=3226×100130>123.07

The calculated value of consumer price index is less than the given value of 130. Thus, option ‘d’ is incorrect.

Economics Concept Introduction

Consumer price index: Consumer Price Index refers to the changes in the price level of consumer goods and services purchased by households.

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