Table 16-6.The table below applies to an economy with only two goods - hamburgers and hot dogs.The fixed basket consists of 4 hamburgers and 8 hot dogs.

-Refer to Table 16-6.If the base year is 2010,then the economy's inflation rate is

Question

Table 16-6.The table below applies to an economy with only two goods - hamburgers and hot dogs.The fixed basket consists of 4 hamburgers and 8 hot dogs.
 
-Refer to Table 16-6.If the base year is 2010,then the economy's inflation rate is

Quizplus · Accepted Answer

To calculate inflation rate, we need to find the percentage change in the price level between the two years.

Using the formula, inflation rate = ((CPI in year 2 - CPI in year 1)/CPI in year 1) x 100

For the base year 2010, the CPI is 100, since it is the reference point.
Therefore, for 2010, the CPI is:

CPI in 2010 = (4 x $2) + (8 x $1) = $20
Inflation rate in 2010 = ((20-20)/20) x 100 = 0%

For 2011, the CPI is:

CPI in 2011 = (6 x $3) + (12 x $1.50) = $39
Inflation rate in 2011 = ((39-20)/20) x 100 = 95%

Therefore, the inflation rate for the economy between 2010 and 2011 is 95%.

Hence, the best choice is D, which states that the inflation rate in 2010 is 10 percent and the inflation rate in 2011 is 6.36 percent.