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

Quizplus · Accepted Answer

To calculate the CPI, we need to use the formula:

CPI = (cost of market basket in current year / cost of market basket in base year) x 100

We are given the quantities and prices for bread and computers in both year 1 and year 2. We can use this information to calculate the cost of the market basket for each year.

Year 1 market basket cost = (10 loaves of bread x $2 per loaf) + (1 computer x $1000) = $20 + $1000 = $1020

Year 2 market basket cost = (12 loaves of bread x $2.50 per loaf) + (1 computer x $800) = $30 + $800 = $830

Using the formula for CPI, we can calculate:

CPI = ($830 / $1020) x 100 = 81.37

Therefore, the CPI for year 2 is approximately 131.3.

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