Part 2. Suppose that the consumers buy 5 apples and 3 oranges every year (basket of goods), and the price of each one was shown as the following:
2012
2013
2014
Apple
$2
$3
$4
Orange
$3
$4
$5
If we considered 2012 is the base year, then:
What is the value of the Consumer price index (CPI) in 2012, 2013, and 2014?
What is the value of Inflation in, 2013, and 2014?
In your opinion, how inflation affects economic activities.
Part 2. Suppose that the consumers buy 5 apples and 3 oranges every year (basket of goods), and the price of each one was shown as the following:
|
2012 |
2013 |
2014 |
|
|
Apple |
$2 |
$3 |
$4 |
|
Orange |
$3 |
$4 |
$5 |
If we considered 2012 is the base year, then:
What is the value of the Consumer price index (CPI) in 2012, 2013, and 2014?
What is the value of Inflation in, 2013, and 2014?
In your opinion, how inflation affects economic activities.
Related textbook solutions
Related questions
Part 2. Suppose that the consumers buy5 apples and 3 oranges every year(basket of goods), and the price of each one was showed as the following: (35 Marks)
|
2012 |
2013 |
2014 |
|
|
Apple |
$2 |
$3 |
$4 |
|
Orange |
$3 |
$4 |
$5 |
If we considered2012 is the base year, then:
What is the value of the Consumer price index (CPI) in 2012, 2013, and 2014?
What is the value of Inflation in, 2013, and 2014?
In your opinion, how inflation affects economic activities.
Consider a simple economy that only produces two goods; apples and oranges. The following table shows prices and quantities over a 3 year period.
|
Price of |
Quantity of |
Price of |
Quantity of |
|
|
YEAR |
Apples |
Apples |
Oranges |
Oranges |
|
2012 |
2 |
20 |
1 |
10 |
|
2013 |
3 |
24 |
2 |
12 |
|
2014 |
4 |
30 |
3 |
20 |
Use the information from the previous table to fill out the following table:
|
Real GDP |
GDP |
||
|
YEAR |
Nominal GDP ($) |
(The base year 2012)($) |
Deflator |
|
2012 |
|||
|
2013 |
|||
|
2014 |
Choose one from each:
From 2013 to 2014, nominal GDP (increased or decreased) and real GDP (increased or decreased).
The inflation rate in 2014 was (10%, 40.6%, 29.4%, -28.9%, or -9.1%).
Why is real GDP a more accurate measure of an economyâs production than nominal GDP?
Calculating inflation using a simple price index:
Consider a fictional price index, the College Student Price Index (CSPI), based on a survey of annual purchases of a typical college student. Suppose the following table shows information on the market basket for the CSPI and the prices of each good in 2012, 2013, and 2014
|
|
Quantity in basket |
2012 |
2013 |
2014 |
|
Price($) Cost of basket($) |
Price($) Cost of basket($) |
Price($) Cost of basket($) |
||
|
Notebooks |
10 |
5 50 |
7 |
11 |
|
Calculators |
1 |
100 100 |
110 |
140 |
|
Large coffees |
150 |
1 150 |
1 |
1 |
|
Energy drinks |
50 |
2 100 |
3 |
4 |
|
Textbooks |
10 |
100 1000 |
120 |
150 |
|
Total cost |
|
1400 |
|
|
|
Price index |
100 |
|
|
The cost of each item in the basket and the total cost of the basket are shown for 2012.
Perform these same calculations for 2013 and 2014, and enter the results in the table.
Suppose the base year for this price index is 2012. Calculate and enter the value of the CSPI for the remaining years in the last row of the table. Between 2012 and 2013, the CSPI increased by..........
Between 2013 and 2014, the CSPl increased by..........
