4. A small nation of ten people idolizes the TV show Canadian Idol. All that tire ten people produce and consume are karaoke machines and CDs, in the following amounts:

Karaoke Machines CDs Quantity Price Quantity Price 2014 10

$40 30

$10 2015 12 60 50 12

a. Using a method similar to the consumer price index, compute the percentage change in the overall price level. Use 2014 as the base year, and fix the basket at 1 karaoke machine and 3 CDs.

b. Using a method similar to the GDP deflator, compute the percentage change of the overall price level. Also use 2014 as the base year.

c. Is the inflation rate in 2015 the same using the two methods? Explain why or why not.