Which do you think has a greater affect on the Consumer Price Index: 10% increase on Chicken or a 10% increase on caviar? Explain why you chose this answer.2. Explain the three reasons why Consumer Price Index may be an imperfect form of measure. If not can it approximate the real rate of inflation?

3. If the price of French wine rises does this affect the CPI or the GDP deflator the most. why?

4. If the price of a candy bar rose from $0.20 to $1.20 and at the same time the CPI rose from 150 to 200. Would the candy bar rise be more or less than the CPI rise? Do the math and explain.

5. Explain the meanings of the nominal interest rate and the real interest rate. How are they related?