The British Office of National Statistics decides about the CPI basket of goods and assumes that alcohol
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The British Office of National Statistics decides about the CPI basket of goods and assumes that alcohol and tobacco account for almost 5% of total consumer expenditure in the UK.
a) With everything else the same, if the prices of alcohol and tobacco increase by 20%, by how much would the CPI increase?
b) Does the CPI correctly measure the true change in the cost of living of a British citizen who neither drinks alcohol nor smokes?
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Jonas Araujo
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