Use the table below to answer the following questions.
Table 6-2

-The market basket used to calculate the CPI in Aquilonia is 4 loaves of bread, 6 litres of milk, 2 shirts, and 2 pairs of pants. In 2005 the price of bread was $1.00 per loaf, the price of milk was $1.50 per litre, the price of a shirt was $6.00, and the price of a pair of pants was $10.00. In 2006 the price of bread was $1.75 per loaf, the price of milk was $2.25 per litre, the price of a shirt was $7.50, and the price of a pair of pants was $13.00. What was the inflation rate, as measured by the CPI, for Aquilonia between 2005 and 2006?

Question

Use the table below to answer the following questions.
Table 6-2
 
-The market basket used to calculate the CPI in Aquilonia is 4 loaves of bread, 6 litres of milk, 2 shirts, and 2 pairs of pants. In 2005 the price of bread was $1.00 per loaf, the price of milk was $1.50 per litre, the price of a shirt was $6.00, and the price of a pair of pants was $10.00. In 2006 the price of bread was $1.75 per loaf, the price of milk was $2.25 per litre, the price of a shirt was $7.50, and the price of a pair of pants was $13.00. What was the inflation rate, as measured by the CPI, for Aquilonia between 2005 and 2006?

Quizplus · Accepted Answer

To calculate the CPI for each year, find the total cost of the market basket for each year. In 2005, the cost is (4*$1.00) + (6*$1.50) + (2*$6.00) + (2*$10.00) = $47. In 2006, the cost is (4*$1.75) + (6*$2.25) + (2*$7.50) + (2*$13.00) = $64. The inflation rate is ((64-47)/47)*100 = 36.17%, which rounds to 36.67%.

Use the Table Below to Answer the Following Questions