Question
Inflation and the Consumer Price Index (CPI) (12 marks) A closed economy produces the following products: cars and boats. You should use the information in
Inflation and the Consumer Price Index (CPI) (12 marks)
A closed economy produces the following products: cars and boats. You should use the information in the following table to calculate the following:
Product | Quantity | Base Year Price (2018) | Price (2020) | Price (2021) |
Cars | 20 | $4.00 | $4.2 | $5 |
Boats | 40 | $8.00 | $9 | $9 |
a) The total cost of the consumption basket consisting of 20 cars and 40 boats in 2018, 2020 and 2021. (3 marks)
b) Consumer Price Index (CPI) for years 2020 and 2021 that measures the cost of the consumption basket relative to the base year. (6 marks)
c) The rate of inflation for 2021. (3 marks)
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