Question 1: CPI during COVID-19 The consumer price index (CPI) in Australia measures how prices for a fixed basket of goods and services comprising items bought by Australian households change over time. For example, the ABS report for the CPI in the June 2020 quarter is available at: https://www.abs.gov.au/ausstats/abs@.nsf/mf/6401.0 The report states that prices fell 1.9% in the June 2020 quarter, compared to a rise of 0.3% in the March 2020 quarter. Watch the following YouTube video for more information on this. We're in deflation for the first time in 22 years (12:18) https://www.youtube.com/watch?=ISLTRyOpayo The figure below, which is Figure 8.2 from the text, shows the CPI market basket for Australia used by the ABS. Insurance and financial services Education 5.0816 Food and non-alcoholic 3.18% beverages 16.84% Recreation and culture 12 06% Alcohol and tobacco Communication 7079% 3.059% Clothing and footwear Transportation 11.555% Health Housing 5.2096 22.3016 Furnishings, household equipment and services 9.10% (a) Using data on consumer spending from the following website that tracks consumer spending during the COVID-19 period (https://alphabeta.com/illiontracking/), provide a critique on the calculation of the CPI in the June 2020 quarter by the ABS. (Note that the consumer spending indices reflect price x quantity of items purchased). (b) Assume that prices in two of the twenty categories listed in the website in part (a) (food delivery; furniture and office) have increased by 8 percent since the start of COVID-19 (i.e. between Jan to July 2020), while prices for two other categories (travel and taxi/rideshare) have decreased by 10 percent. Assume that prices for the remaining 16 categories remain constant. Explain what effect this will have on the inflation rate, and how you arrived at your conclusion, including any assumptions that you make