Table 24-4
The table below pertains to an economy with only two goods -- books and calculators. The fixed basket consists of 5 books and 10 calculators.

-Refer to Table 24-4.Using 2006 as the base year,the inflation rate is

Question

Table 24-4
The table below pertains to an economy with only two goods -- books and calculators. The fixed basket consists of 5 books and 10 calculators.
 
-Refer to Table 24-4.Using 2006 as the base year,the inflation rate is

Quizplus · Accepted Answer

To calculate the inflation rate, we need to use the formula:

Inflation rate = ((Price index in current year - Price index in base year)/Price index in base year) x 100

For 2007:
Price index in 2007 = (12 x 5) + (18 x 10) = 210
Inflation rate for 2007 = ((210 - 150)/150) x 100 = 40%

For 2008:
Price index in 2008 = (16 x 5) + (21 x 10) = 245
Inflation rate for 2008 = ((245 - 150)/150) x 100 = 63.3%

Since the base year is 2006, we don't need to calculate the inflation rate for that year. Therefore, option B is the best choice as it matches the calculated inflation rates for 2007 and 2008.

Table 24-4 The Table Below Pertains to an Economy with Only Two