Assume that people in an economy only consume the following goods shown in the table: RiceMeatJuice Year 1 priceP2P4P1Year 1 quantity100100200Year 2 priceP2P6P2Year 2 quantity100100200 Calculate the % change in the price of every goods.Using the same method with the CPI, calculate the % change of the overall price level.If you were to learn that juice increased in size from Year 1 to Year 2, should that information affects your calculation of the inflation rate? If so, how?If you were to learn that juice introduced new flavors in Year 2, should that information affect your calculation of the inflation rate? If so, how?

Consumption is defined as the purchase of goods and services by the households for their…

Answered: P2 P4 P1 Year 1 quantity 100 100…

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter16: Measuring The Cost Of Living

Section: Chapter Questions

Problem 3CQQ

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Assume that people in an economy only consume the following goods shown in the table:

	Rice	Meat	Juice
Year 1 price	P2	P4	P1
Year 1 quantity	100	100	200
Year 2 price	P2	P6	P2
Year 2 quantity	100	100	200

Calculate the % change in the price of every goods.
Using the same method with the CPI, calculate the % change of the overall price level.
If you were to learn that juice increased in size from Year 1 to Year 2, should that information affects your calculation of the inflation rate? If so, how?
If you were to learn that juice introduced new flavors in Year 2, should that information affect your calculation of the inflation rate? If so, how?

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