1.     The Consumer Price Index (CPI) measures the changes of the

		prices paid by all businesses for a fixed market basket of production resources.
		prices paid by consumers for a fixed market basket of consumer goods and services.
		quantities of a fixed market basket of goods produced by businesses.
		prices paid by consumers and businesses for a fixed market basket of goods and services.

QUESTION 2

2.  

Market Basket		1990 (Base Year)	2010	2011
Product	Quantity	Price	Price	Price
A	7	$3	$5	$6
B	11	$5	$8	$8
C	20	$6	$8	$9
D	15	$9	$13	$12

2.     If your answer is not a whole number, round to two decimal places.

3.     What is the cost of the market basket in 1990? $

4.     What is the cost of the market basket in 2010? $

5.     What is the cost of the market basket in 2011? $

6.     What is CPI in 1990?

7.     What is CPI in 2010?

8.     What is CPI in 2011?

9.     What was the inflation rate in 2011? %

QUESTION 3

1.     The CPI is biased because it

		does not include services.
		takes into account the changes in product quality.
		does not always take into account the changes in product quality.
		takes into account the changes in technology.