Question
Question 3 (75 points) The government has hired you as an economic statistician and has given the job of calculating the CPI (the Chili Price
Question 3 (75 points) The government has hired you as an economic statistician and has given the job of calculating the CPI (the Chili Price Index; not the consumer price index) at Purchasing Power Parity Brussels and New York City. According to the government's official recipe, the ingredients for a batch of chili are: 3 pounds of hamburger, 2 pounds of tomatoes, and 1/2 pound of onions. The prices of the ingredients for chili are determined by an extensive survey. The current prices for the ingredients in each city are as follows: Ingredients Hamburger Tomatoes Onions Brussels ?1.20 per pound ?1.50 per pound ?0.20 per pound New Yok City $1.15 per pound $1.05 per pound $0.15 per pound Please make sure you show all your work 1) Calculate the cost of a batch of chili in each city (20 points) 2) Calculate the cost of a batch of chili in PPP in each city (20 points) 3) What is the Price Level Index (PLI) of a batch of chili at the current exchange rate of $1.00 to ?0.91, with the United States as the base economy? (20 points) 4) What would happen to the PLI of a batch of chili if the exchange rate were to be $1.00 to ?0.77? (15 points)
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