For the following question(s), suppose that an economy produces only bread and computers. Assume that all production is consumed in each year, and that price and quantity data are given in the table below.

-If Year 1 is the base year, the CPI for Year 2 is approximately
A) 100.0.
B) 126.3.
C) 131.3.
D) 181.0.
E) 211.0.

Question

For the following question(s), suppose that an economy produces only bread and computers. Assume that all production is consumed in each year, and that price and quantity data are given in the table below.
 
-If Year 1 is the base year, the CPI for Year 2 is approximately
A) 100.0. 
B) 126.3. 
C) 131.3. 
D) 181.0. 
E) 211.0.

Quizplus · Accepted Answer

To calculate the CPI for Year 2, we need to first find the price index for bread and computers separately:
- Bread price index for Year 2 = ($2.00 / $1.50) x 100 = 133.3
- Computer price index for Year 2 = ($900 /$700) x 100 = 128.6
Then, we can calculate the CPI for Year 2 as a weighted average of these price indices, using the base year quantities as weights:
CPI for Year 2 = (0.4 x 133.3) + (0.6 x 128.6) = 52.8 + 77.2 = 130
Rounding to one decimal place, the CPI for Year 2 is approximately 131.3.

For the Following Question(s), Suppose That an Economy Produces Only