Table 24-1
The following table pertains to Quicheland, an economy in which the typical consumer's basket consists of 15 bushels of apples and 7 bushels of almond .

$$\begin{array} { | l | c | c | }
\hline \text { Year } & \begin{array} { c }
\text { Price of Apples } \
\text { (Dollarsp er bushel) }
\end{array} & \begin{array} { c }
\text { Price of Almond } \
\text { (Dollars per bushel) }
\end{array} \
\hline \text { Year 1 } & 12 & 4 \
\hline \text { Year } 2 & 7 & 11 \
\hline
\end{array}$$
-Refer to Table 24-1. If Year 1 is the base year, then the inflation rate in Year 2 was
A)12.50 percent.
B)-15.00 percent.
C)-9.00 percent.
D)-12.50 percent.

Question

Table 24-1
The following table pertains to Quicheland, an economy in which the typical consumer's basket consists of 15 bushels of apples and 7 bushels of almond .
​
​
 $$\begin{array} { | l | c | c | } 
\hline \text { Year } & \begin{array} { c } 
\text { Price of Apples } \
\text { (Dollarsp er bushel) }
\end{array} & \begin{array} { c } 
\text { Price of Almond } \
\text { (Dollars per bushel) }
\end{array} \
\hline \text { Year 1 } & 12 & 4 \
\hline \text { Year } 2 & 7 & 11 \
\hline
\end{array}$$ ​
-Refer to Table 24-1. If Year 1 is the base year, then the inflation rate in Year 2 was
A)12.50 percent.
B)-15.00 percent.
C)-9.00 percent.
D)-12.50 percent.

Quizplus · Accepted Answer

To calculate the inflation rate from Year 1 to Year 2, first, we need to calculate the Consumer Price Index (CPI) for each year using Year 1 as the base year. The formula for CPI is: $$CPI = \frac{\text{Cost of basket in current year}}{\text{Cost of basket in base year}} \times 100$$For Year 1 (base year):$$CPI_{Year 1} = \frac{(15 \times 12) + (7 \times 4)}{(15 \times 12) + (7 \times 4)} \times 100 = \frac{180 + 28}{180 + 28} \times 100 = \frac{208}{208} \times 100 = 100$$For Year 2:$$CPI_{Year 2} = \frac{(15 \times 7) + (7 \times 11)}{(15 \times 12) + (7 \times 4)} \times 100 = \frac{105 + 77}{208} \times 100 = \frac{182}{208} \times 100 \approx 87.5$$The inflation rate from Year 1 to Year 2 is calculated as:$$\text{Inflation Rate} = \frac{CPI_{Year 2} - CPI_{Year 1}}{CPI_{Year 1}} \times 100 = \frac{87.5 - 100}{100} \times 100 = -12.5\%$$Therefore, the inflation rate in Year 2 was -12.50 percent, indicating deflation rather than inflation.

Table 24-1 the Following Table Pertains to Quicheland, an Economy

Table 24-1
the Following Table Pertains to Quicheland, an Economy