QUESTION 36 Quantity Price Market Basket )(2011) Price (2012) Item Sre akes $35
ID: 1173726 • Letter: Q
Question
QUESTION 36 Quantity Price Market Basket )(2011) Price (2012) Item Sre akes $35 Consumers in a country buy only two goods, sneakers and manicures. The prices above. The reference base year is 2011. The infiation rate between 2011 and 2012 and quantities purchased by urban households are in the table 10 percent $15. O 15 percent 9 percent QUESTION 37 When economists speak of the CPI bias, they are referring to the tendency for the CPI to understate inflation errors in measuring the prices used in the CPL the tendency for the CPI to understate price changes the tendency for the CPI to overstate price changes. QUESTION 38 A ham and cheese sandwich at the local deli costs $4.99 in 2005. If the CPl in 2005 was 90.0 and the CPI today is 121.0, the the ham and cheese sandwich today is price for $6.71 $G.04 $4.99 $5.54.Explanation / Answer
Let qo,po be base year price and quantity
36. q1,p1 be current year price and quantity
(p11q11+p22q22/po1qo1+po2qo2)*100 = 60*2+1*40 /55*2+35*1 = (160/145)*100 = 110
Inflation = 110 - 100 = 10% is correct answer
37.the tendency of cpi to overstate prices
38. Inflation rate =( 121-90/90 ) = .34
Price = $4.99+.34*4.99 = $6.71 is correct answer