Question

Suppose the price level reflects the number of dollars needed to buy a basket of goods containing one can of soda, one bag of chips, and one comic book. In year one, the basket costs $8.00. In year two, the price of the same basket is $7.00. From year one to year two, there is (blank) at an annual rate of (blank) (how do i calculate the rate?)

In year one, $40.00 will buy (blank) baskets, and in year two, $40.00 will buy(blank)

Answer 1

well the price of the basket decreased. so i would assume it should be deflation or discount for the first blank at a rate of 12.5% you get this by


`(8)/(1) = (100)/(?)`
"1" is the amount of dollars the basket decreased by
**cross multiply the 1 dollar by the 100%
** divide by 8 and you get 12.5%

then the last too blanks are easy ust divid each price into 40

40/8 = 5 baskets
40/7 = 5.71 baskets