Hamburgers and beer are the sole goods in a simple economy. In year 1 a hamburger costs $5.0 and a beer $2.0, whereas in year 2 a hamburger costs $10.0 and a beer $2.0. The basket of goods defining the Consumer Price Index (CPI) is 10 hamburgers and 10 beers. The consumers consume exactly 10 units of each good in year 1. (a) What is the CPI in year 1 and year 2, when year 1 is treated as the base year? (b) Assume that the income of the consumers in this economy is adjusted from year 1 to year 2 using the percentage change in the CPI. Does the change in the CPI between year 1 and 2 overstate, understate or correctly state the change in the "cost of living"? Explain carefully. [Hint: Figure out what an economist means by the term the "cost of living" by reading the book or the article on the CPI.

:5. Hamburgers and beer are the sole goods 1n a s1mp1e economy. in year 1 a hamburger costs $5.0 and a beer $2.0, Whereas in year 2 a hamburger costs $10.0 and a beer $2.0. The basket of goods dening the Consumer Price Index (CPI) is 10 hamburgers and 10 beers. The consumers consume exactly 10 units of each good in year 1. (a) What is the CPI in year 1 and year 2, when year 1 is treated as the base year? (b) Assume that the income of the consumers in this economy is adjusted from year 1 to year 2 using the percentage change in the CPI. Does the change in the CPI between year 1 and 2 overstate, understate or correctly state the change in the \"cost of living\"? Explain carefully. [Hintz Figure out What an economist means by the term the \"cost of living\" by reading the book or the article on the CPI.]