Question

Ten years ago, a smoothie at Kay's Smoothies cost $1.25. Today it costs $2.00. In order to attribute this price increase of smoothies at Kay's to inflation, what else would need to be true?

Answer 1

In order to attribute the price increase of smoothies at Kay's to inflation, three main factors would need to be true: a general rise in prices, no significant changes in smoothie quality, and no changes in the basket of goods used to measure inflation.

Step-by-step explanation:

In order to attribute the price increase of smoothies at Kay's to inflation, three main factors would need to be true:

1. General Rise in Prices: The price increase of the smoothie should be part of a general rise in the level of all prices.
2. No Significant Changes in Smoothie Quality: If the smoothie quality remains the same despite the price increase, it can be attributed to inflation. However, if there are significant improvements to the smoothie's quality, the price increase might be due to those improvements rather than inflation.
3. No Changes in Basket of Goods: To accurately measure inflation, the cost of a fixed basket of goods should stay consistent over time. If the smoothie is part of a fixed basket of goods and its price increases, it can be attributed to inflation.

Answer 2

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