Question
Explain whether you think the CPI would over-estimate, under-estimate or accuratelyreflect the change in the general price level as a result of the following situation.
Explain whether you think the CPI would over-estimate, under-estimate or accuratelyreflect the change in the general price level as a result of the following situation. If the circumstance does not accurately reflect the change in the general price level, please name the type of CPI bias.
"A disease has affected apple trees in Australia and significantly reduced the availability of apples for a year. This has caused a significant increase in the price of apples."
Consider a simple economy that produces only three products: haircuts, ice cream and cars. Use the information in the following table to calculate the inflation rate for 2019 as measured by the consumer price index (CPI). Keep your answers to 2 decimal places (where appropriate).
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