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)126.3.
B)131.3.
C)100.0.
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)126.3. 
B)131.3. 
C)100.0. 
D)181.0. 
E)211.0.

Quizplus · Accepted Answer

To calculate the CPI for Year 2, we need to find the cost of the basket of goods in Year 2 and divide it by the cost of the same basket of goods in the base year (Year 1) and multiply it by 100.

The basket of goods consists of 10 loaves of bread and 5 computers, which cost $40 in Year 1 and $52 in Year 2.

Therefore, the CPI for Year 2 is:

(Cost of basket in Year 2 / Cost of basket in Year 1) x 100
= (52 / 40) x 100
= 130

Rounding to one decimal place, we get the answer choice (B) 131.3.

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