Question
2. Suppose that the hypothetical consumer market basket consists of only two goods (Goods B and C) in the quantities: B = 10 and C
2. Suppose that the hypothetical "consumer market basket" consists of only two goods (Goods B and C) in the quantities: B = 10 and C = 6. Assume that the base year is 2021 (i.e., 2021 = 100). Use the table below to determine the CPI values and the inflation rate.
Year 2020 Year 2021 Year 2022
Quantity of Good B 3 6 9
Price of Good B $1.00 $2.00 $3.00
Quantity of Good C 20 20 20
Price of Good C $0.25 $0.25 $0.25
a. What is the total money value spent on the consumer market basket in 2022?
b. Calculate the CPI for 2021 and 2022.
c. What is the inflation rate from 2021 to 2022?
d. If an individual's nominal income rises 50%, what is the growth rate of their real income?
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