Essay
The following table shows the consumption goods categories that Statistics Canada uses to compute the consumer price index, their weights as percentages in a typical consumer's total expenditure, as well as some hypothetical prices of those generic goods. Since the weights are adjusted such that their sum is 100, the year 1 prices are given as price ratios p1/p0, where p0 is the base year price.
a.Calculate the consumer price index in Year 1 and Year 2.
b.Calculate the inflation rate in Year 1, Year 2, and between Year 1 and Year 2.
c.Explain how the weights in column 2 were determined. Discuss the meaning of "Price of food."
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a.Since we are given the weights of vari...View Answer
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