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Problem Set 2 1. Use the information provided to compute the basket cost, consumer price index, and inflation rate for the indicated years. Basket Fish
Problem Set 2 1. Use the information provided to compute the basket cost, consumer price index, and inflation rate for the indicated years. Basket Fish Coconuts 25 40 Year/Prices Fish Coconuts $ Year 1 10.00 4.00 S Year 2 15.00 5.00 S $ Year 3 14.00 6.00 Year Basket Cost Year 1 $ Year 2 Year 3 Year CPI Year 1 Year 2 Year 3 Year Inflation Year 2 Year 3 2. Your text notes that many economists believe the CPI overstates the rate of inflation by between one-half and one percentage point per year. Briefly discuss the problems the CPI faces in measuring the cost of living that might lead to overstating true inflation
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