Merryland is a closed economy that produces and consumes only marshmallows and chocolates. In 2019, marshmallows cost $1 each, chocolates cost $2 each, and Merrylanders buy 10 marshmallows. In 2020, marshmallows cost $2, chocolates cost $1, and Merrylanders buy 10 chocolates. Consider 2019 as the base year wherein the consumer basket is fixed. If the government of Merryland determines that the typical consumer basket is composed of 3 marshmallows and 2 chocolates, how did the CPI change from 2019 to 2020?
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It increased by 15.1%
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It decreased by 13. 5%
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It increased by 14.3%
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It decreased by 11.4%
Merryland is a closed economy that produces and consumes only marshmallows and chocolates. In 2019, marshmallows cost $1 each, chocolates cost $2 each, and Merrylanders buy 10 marshmallows. In 2020, marshmallows cost $2, chocolates cost $1, and Merrylanders buy 10 chocolates. Consider 2019 as the base year wherein the consumer basket is fixed. If the government of Merryland determines that the typical consumer basket is composed of 3 marshmallows and 2 chocolates, how did the CPI change from 2019 to 2020?
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It increased by 15.1%
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It decreased by 13. 5%
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It increased by 14.3%
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It decreased by 11.4%
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Related textbook solutions
Related questions
Calculating inflation using a simple price index.
Consider a frictional price index, the College student price index (CSPI), based on a survey of annual purchases of a typical college student. Suppose the following table show information on the market basket for the CSPI and the prices for each good in 2012, 2013, and 2014.
| Quantity in Basket | 2012 Price cost | 2013 Price cost | 2014 Price cost | |
| Notebooks | 10 | 2 20 | 1 | 3 |
| Calculators | 1 | 50 50 | 54 | 75 |
| Large coffees | 200 | 1 200 | 1 | 1 |
| Energy drinks | 100 | 2 200 | 3 | 4 |
| Textbooks | 10 | 100 1000 | 120 | 150 |
| Total cost | 1470 | |||
| Price index | 100 |
The cost of each item in the basket and total cost of the basket are shown for 2012. Perform these same calculations for 2013 and 2014 and enter the results into 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 (120%, 20%, 25%, or 150%).
Between 2013 and 2014, the CSPI increased by (120%, 150%, 30%, or 25%).
Which of the following, if true, would illustrate why price indexes such as CSPI might overstate inflation in the cost of going to college?
A. As the price of energy drinks increased relative to the price of coffee 2012 and 2014, students decreased their consumption of energy drinks and increased their consumption of coffee.
B. Professors required each student to buy 10 textbooks, regardless of the price.
C. The quality of textbooks increased dramatically from 2012 to 2014, with textbook companies bundling new online study aids with their books.
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figure: Production Possibilities Reference: Ref 2-1
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11. |
Between 1990 and 2010, the number of people in the world living in poverty has: |
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been cut in half. |
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doubled. |
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increased by 50%. |
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According to the table, the nominal GDP for 2013 is approximate: |
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26. |
If the cost of a typical market basket is 400 in 2018, 410 in 2019, and 405 in 2020, then during this period the economy is undergoing: |
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My instructor told me the right answer and told me to explain why is the B is the right answer? If u explain I would really appreciate it!!
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(Table) According to the table, what is the unemployment rate of this economy? |
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29. |
The inflation rate is 4%. Social Security payments automatically rise by 4%. This adjustment is authorized by an: |
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Score: 0 of 1 |
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34. |
We are least likely to be heading into a recession when the National Activity Index equals: |
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Score: 0 of |
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My instructor told me the right answer and told me to explain why is D is the right answer? If u explain I would really appreciate it!!
