Question

Table 24-6

The table below pertains to Napandsnack, an economy in which the typical consumer's basket consists of 2 pillows and 15 hotdogs.

Year Price of a Pillow Price of a Hotdog
2009 $40 $3
2010 $45 $4
2011 $50 $3

Refer to Table 24-6. If the base year is 2010, then the economy's inflation rate in 2010
was
O 10.5 percent.
O 15.0 percent.
O 25.00 percent.
O 20.0 percent

Answer 1

The economy's inflation rate in 2010 was approximately 31.53%.

Step-by-step explanation:

To calculate the inflation rate in 2010, we need to compare the prices of the goods in the base year (2010) to the prices in the current year (2010). We can calculate the inflation rate using the formula: (Price in Current Year - Price in Base Year) / Price in Base Year * 100. For the price of a pillow, the inflation rate would be: (45 - 45) / 45 * 100 = 0%. For the price of a hotdog, the inflation rate would be: (4 - 3) / 3 * 100 = 33.33%. Since the basket consists of 2 pillows and 15 hotdogs, we can calculate the average inflation rate by taking a weighted average of the inflation rates of the two goods: (2/17) * 0% + (15/17) * 33.33% = 31.53%. Therefore, the economy's inflation rate in 2010 was approximately 31.53%.

Answer 2

The economy's inflation rate in 2010, with the base year as 2010, was 20%. The Option D is correct..

Inflation Rate = [(CPI in Current Year - CPI in Base Year) / CPI in Base Year] * 100

CPI in 2010 = [(2 * $45) + (15 * $4)] / [(2 * $40) + (15 * $3)]

= ($90 + $60) / ($80 + $45)

= $150 / $125

= 1.2

CPI in 2009 = [(2 * $40) + (15 * $3)] / [(2 * $40) + (15 * $3)]

= ($80 + $45) / ($80 + $45)

= $125 / $125

= 1.0

Inflation Rate= {(CPI 2010 - CPI 2010)/CPI 2010} * 100

= [(1.2 - 1.0) / 1.0] * 100

= [(0.2 / 1.0) * 100

= 20%

Note: The organized question is attached below.