d) Is the inflation rate that you've calculated likely to be biased? Why or why not?

MACROECONOMICS
14th Edition
ISBN:9781337794985
Author:Baumol
Publisher:Baumol
Chapter5: An Introduction To Macroeconomics
Section: Chapter Questions
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Solve part d

Assuming that a household in Hadililand consumes only apple juice and T-shirts. Last year, which was the base year, the household spent $440 on juice and $132 on shorts. In the
base year, juice was $2.2 a bottle and shorts were $11 a pair. This year, juice is $3.3 a bottle, shorts are $13.2 a pair, and a typical household has bought 198 bottles of juice and 15
pairs of shorts.
a) What is the basket used in the CPI?
b) Calculate the CPI in the current year.
c) Calculate the inflation rate in the current year.
d) Is the inflation rate that you've calculated likely to be biased? Why or why not?
Transcribed Image Text:Assuming that a household in Hadililand consumes only apple juice and T-shirts. Last year, which was the base year, the household spent $440 on juice and $132 on shorts. In the base year, juice was $2.2 a bottle and shorts were $11 a pair. This year, juice is $3.3 a bottle, shorts are $13.2 a pair, and a typical household has bought 198 bottles of juice and 15 pairs of shorts. a) What is the basket used in the CPI? b) Calculate the CPI in the current year. c) Calculate the inflation rate in the current year. d) Is the inflation rate that you've calculated likely to be biased? Why or why not?
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