ECON MACRO
5th Edition
ISBN: 9781337000529
Author: William A. McEachern
Publisher: Cengage Learning
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Chapter 6, Problem 4.8P
To determine
New
Concept introduction:
Consumer price index (CPI): It is a measure of average change in prices over the period of time.
Formula of CPI: Prices of basket of goods in given year /prices of basket of goods in base year*100
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Calculate a new consumer price index for the data in the following exhibit. Assume that current-year prices of Twinkies, fuel oil, and internet are $0.95/package, $1.25/gallon, and $15.00/month, respectively. Calculate the current year’s cost of the market basket and the value of the current year’s price index. What is this year’s percentage change in the price level compared to the base year?
Product
(1)
Quantity in Market Basket
(2)
Prices in Base Year
Twinkies
365 packages
$ 0.89/package
Fuel oil
500 gallons
1.00/gallon
Internet
12 months
30.00/month
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