If an economy is comprised of two goods and the price of one good rises by 5% and the price of the second good rises 3%, a possible rate of inflation for the economy is 5%.

Name: If an economy is comprised of two goods and the price of one good rises by 5% and the price of the second good rises 3%, a possible rate of inflation for the economy is 5%.
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Question

Quizplus · Accepted Answer

The rate of inflation for the economy would be a weighted average of the price increases of both goods, not just the highest increase.

If an Economy Is Comprised of Two Goods and the Price