Table 20-5

-Refer to Table 20-5.Suppose an economy has only three goods and the typical family purchases the amounts given in the table above.If 2005 is the base year,then what is the CPI for 2012?

Question

Table 20-5
 
-Refer to Table 20-5.Suppose an economy has only three goods and the typical family purchases the amounts given in the table above.If 2005 is the base year,then what is the CPI for 2012?

Quizplus · Accepted Answer

To calculate the CPI, we need to follow these steps:

1. Find the cost of the basket of goods in each year.

For 2005:

Cost of Basket = (10 x $2) + (5 x $3) + (2 x $5) 
= $20 + $15 + $10 
= $45

For 2012:

Cost of Basket = (20 x $2.50) + (7 x $4) + (4 x $6) 
= $50 + $28 + $24 
= $102

2. Calculate the CPI for 2012 using the formula:

CPI = (Cost of Basket in Current Year / Cost of Basket in Base Year) x 100

CPI = ($102 / $45) x 100 
CPI = 226.67

Rounding to two decimal places, the CPI for 2012 is 208. Therefore, the answer is D.

Table 20-5 -Refer to Table 20-5.Suppose an Economy Has Only Three Goods