Question
In a simple economy, people consume only two goods: food and clothing. The market basket of goods used to compute the CPI consists of 50
In a simple economy, people consume only two goods: food and clothing. The market basket of goods used to compute the CPI consists of 50 units of food and 10 units of clothing.
| Food | Clothing | |
|---|---|---|
| 2002 Price per Unit | $4 | $10 |
| 2003 Price per Unit | $6 | $20 |
a. What are the percentage increases in the price of food and in the price of clothing?
b. What is the percentage increase in the CPI?
c. Do these price changes affect all consumers to the same extent? Explain.
Step by Step Solution
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Step: 1
The consumer price index CPI evaluates the overall cost of a basket or bundle of goods and services ...
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Principles of Macroeconomics
Authors: Karl E. Case, Ray C. Fair, Sharon E. Oster
12th edition
134078802, 978-0134078809
