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The residents of Vegopia spend all of their income on cauliflower, broccoli, and carrots. In 2016, they spend a total of $200 for 100 heads of cauliflower, $75 for 50 bunches of broccoli, and $50 for 500 carrots. In 2017, they spend a total of $225 for 75 heads of cauliflower, $120 for 80 bunches of broccoli, and $100 for 500 carrots. a. Calculate the price of one unit of each vegetable in each year. b. Using 2016 as the base year, calculate the CPI for each year. c. What is the inflation rate in 2017?

BuyFind

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781337091985
BuyFind

Brief Principles of Macroeconomics...

8th Edition
N. Gregory Mankiw
Publisher: Cengage Learning
ISBN: 9781337091985

Solutions

Chapter
Section
Chapter 6, Problem 2PA
Textbook Problem

The residents of Vegopia spend all of their income on cauliflower, broccoli, and carrots. In 2016, they spend a total of $200 for 100 heads of cauliflower, $75 for 50 bunches of broccoli, and $50 for 500 carrots. In 2017, they spend a total of $225 for 75 heads of cauliflower, $120 for 80 bunches of broccoli, and $100 for 500 carrots.

a. Calculate the price of one unit of each vegetable in each year.

b. Using 2016 as the base year, calculate the CPI for each year.

c. What is the inflation rate in 2017?

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