Information for Question 1 In a country, suppose the consumption basket of an average citizen comprises of 10 oz of apples, 12 oz of bananas, 2 oz of grapes and 1 oz of raspberry. The consumption basket stays the same across time 2018 - 2021 The price of an ounce for each of these products are given in the next slide (across the years) Suppose the base year is 2020 Question 1 Years Price of Price of Price ofk Price of m 2018 $0.50 $0.20 $0.65 $2.00 2019 $0.75 $0.25 $0.70 $1.9 2020 $0.85 $0.25 $0.90 $2.05 2021 $0.88 $0.29 $0.95 $2.13 A) Find the cost of apples, bananas, grapes and raspberries in all the years Find the Cost of the basket in all these years, the CPL in all years and inflation or deflation in all these years. B) 2/20/202 Hay ol U To answer Q1 A you can use a table like below Years Costo Price of I Apple Price of y I y Banana Cost of Price ofk Cost of k Cost of Price of m Grapes Raspberr Cest of the basket 2018 $0.50 $?$0.20 $? $0.65 $2.00 $? 2019 $0.75 $? $0.25 $? $0.70 $1.9 $? 2020 $0.85 $? $0.25 $? $0.90 $2.05 $? 2021 $0.88 $?$0.29 $? $0.95 $2.13 $? To answer Q1 B you can use a table like below Year Cost of the Best in the current year CPI * change in CPI Inflation or Deflation Cost of the besker in the bure year(2020) * 100 2018 N/A 2019 $2 57 2020 S? 57 2021 52 S? Page Question 2 A) The index number representing the price level changes from 110 to 115 in one year, and then from 115 to 120 the next year. Since the index number increases by five each year, is five the inflation rate each year? Is the inflation rate the same each year? Explain your answer B) A mortgage loan is a loan that a person makes to purchase a house. The following table provides a list of the mortgage interest rate being charged for several different years and the rate of inflation for each of those years. In which years would it have been better to be a person borrowing money from a bank to buy a home? In which years would it have been better to be a bank lending money? (Hint: Use Fisher Effect Equation) Year Mortgage Interest Rate Inflation Rate 3934 1990 2001 12.4% 10% 7.0% 4.3% 5.4% 2.8%