Quantity of Good A 10 12 14 Price of Good A $0.50 $1.00 $1.50 Quantity of Good B 3 6 9 Price of Good B $1.00 $2.00 $3.00 Quantity of Good C 20 20 20 Price of Good C $0.25 $0.25 $0.25 Refer to the GDP table above. Also suppose that a hypothetical “consumer market basket” consists only of goods B and C, in the quantities: B = 5 and C = 10. Use 2020 as a base year (i.e., 2020 = 100). a. What is the total money value spent on the consumer market basket in 2020 and 2021? b. Calculate the CPI for 2020, and 2021. c. What is the inflation rate for 2020 - 2021?
Year 2019 Year 2020 Year 2021
Quantity of Good A 10 12 14
Quantity of Good B 3 6 9
Price of Good B $1.00 $2.00 $3.00
Quantity of Good C 20 20 20
Price of Good C $0.25 $0.25 $0.25
Refer to the
a. What is the total money value spent on the consumer market basket in 2020 and 2021?
b. Calculate the
c. What is the inflation rate for 2020 - 2021?
d. If an individual’s nominal income rises 25% from 2020 - 2021, what is the growth rate of their real income?
e. If the base year is 2021 (instead of 2020), what will be the new CPI values for 2020 and 2021?
f. With the “updated” CPI values from question “e”, will the inflation rates for 2020 - 2021 change, or stay the same? Justify your answer.
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