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Suppose an economy consumes only two goods: food and entertainment. The following table shows quantities consumed and prices for three years: Year 0 (the base

Suppose an economy consumes only two goods: food and entertainment. The following table shows quantities consumed and prices for three years: Year 0 (the base year), Year 1, and Year 2.

Item Year 0 Year 1 Year 2
Quantity (units)

Price

($ / unit)

Quantity (units)

Price

($ / unit)

Quantity (units)

Price

($ / unit)

Food 50 5 75 6 80 4
Entertainment 100 12 110 11 115 14

a) Compute the CPI in years 1 and 2.

b) For Year 0, compute the shares in expenditure of each of the two goods.

c) compute inflation rates (from year 0 to year 1 and from year 1 to year 2) based on GDP deflator.

Present answer with 2 decimals.

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