The total price of purchasing a basket of goods in the United Kingdom over four years is: year 1 = £940; year 2 = £970; year 3 = £1000; and year 4 = £1070. Calculate two price indices, one using year 1 as the base year (set equal to 1o00) and the other using year 4 as the base year (set equal to 100). Then calculate the inflation rate based on the first price index. If you had used the other price index, would you get a different inflation rate? Do the calculations to support your answer.
The total price of purchasing a basket of goods in the United Kingdom over four years is: year 1 = £940; year 2 = £970; year 3 = £1000; and year 4 = £1070. Calculate two price indices, one using year 1 as the base year (set equal to 1o00) and the other using year 4 as the base year (set equal to 100). Then calculate the inflation rate based on the first price index. If you had used the other price index, would you get a different inflation rate? Do the calculations to support your answer.
Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)
14th Edition
ISBN:9781305506381
Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris
Chapter5: Business And Economic Forecasting
Section: Chapter Questions
Problem 2E
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