Question

Consider an economy with only two goods: bread and wine. In the base year, the typicalfamily bought 4 loaves of bread at $2 per loaf and 2 bottles of wine for $9 per bottle. In a given year, bread cost $3 per loaf, and wine cost $10 per bottle. The CPI for the given year is: * 1 point

Answer 1

The CPI for the given year is 123.

Step-by-step explanation:

Consumer price index (CPI)

`=\frac{\textrm{cost at given year}}{\textrm{cost at base year}}`

In the base year, the typical family bought 4 loaves of bread at $2 per loaf and 2 bottles of wine for $ 9 per bottle.

Cost at base year =$[(4×2)+(2×9)]

=$26

In a given year, bread cost $3 per loaf and wine cost $10 per bottle.

Cost at given year =$[(4×3)+(2×10)]

=$32

The CPI for the given year is

`=\frac {32}{26}* 100`

≈123