Table 11-6. The table below applies to an economy with only two goods - hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. $$\begin{array} { l c c }
\hline \text { Year } & \text { Priee of hamburegers } & \text { Prife of hat doges } \
\hline 2009 & \$ 5.00 & \$ 3.00 \
2010 & 5.50 & 3.30 \
2011 & 5.61 & 3.63 \
\hline
\end{array}$$
-Refer to Table 11-6. If the base year is 2010, then the economy's inflation rate is

Question

Table 11-6. The table below applies to an economy with only two goods - hamburgers and hot dogs. The fixed basket consists of 4 hamburgers and 8 hot dogs. $$\begin{array} { l c c } 
\hline \text { Year } & \text { Priee of hamburegers } & \text { Prife of hat doges } \
\hline 2009 & \$ 5.00 & \$ 3.00 \
2010 & 5.50 & 3.30 \
2011 & 5.61 & 3.63 \
\hline
\end{array}$$
-Refer to Table 11-6. If the base year is 2010, then the economy's inflation rate is

Quizplus · Accepted Answer

To calculate inflation rate, we use the fixed basket approach. Since the fixed basket consists of 4 hamburgers and 8 hot dogs, we can calculate the price of the fixed basket in each year.

In 2010, the price of the fixed basket was:

4 x 5.50 + 8 x 3.30 = 22 + 26.40 = $48.40

In 2011, the price of the fixed basket was:

4 x 5.61 + 8 x 3.63 = 22.44 + 29.04 = $51.48

Therefore, the inflation rate from 2010 to 2011 is:

(Inflation rate = (Price level in year 2 - Price level in year 1) / (Price level in year 1) x 100)

= [(51.48 - 48.40) / 48.40] x 100

= 6.36%

Therefore, the answer is D.

Table 11-6 -Refer to Table 11-6