2. Suppose that to calculate the CPI we use three goods: bread, water, and diet cola. A typical consumer buys 6 loaves of bread, 5 containers of water, and 7 cans of diet cola. Prices of these goods are given in the table below for each of three years: YEAR PRICE OF PRICE OF PRICE OF DIET VALUE CPI CPI/INFLATION BREAD WATER COLA OF MARKET RATE BASKET 1 $ 8.25 $4.00 $5.10 2 $8.75 $4.22 $5.20 3 $9.05 $4.50 $5.25 Assume year 1 is the base year. Calculate the value of the market basket for each year. Remember the basket of goods is the same from year to year. a. Calculate the CPI and the inflation rate. (6 marks) b. Calculate the CPI and the inflation rate with year 2 the base year (6 marks) 1. You are given the following information by a certain economy: Compensation of Employees Net Interest Income Depreciation Indirect Taxes Subsidies 540 120 15 100 80 Corporate profits 350 Proprietor's Income 100 Rental Income 210 Payments of Factor Income to the Rest of the World Receipt of Factor Income from the Rest of the World 450 600 Use the information above to calculate: a. National Income (3 marks) b. Indirect Taxes minus Subsidies (2 marks) c. Net Factor Payments to the Rest of the World (4 marks) d. Explain the significance of the value in c. above (6 marks) e. GDP (5 marks) Total 40 marks