Suppose the consumer price index (CPI)is 100 in the year 2004,108 in 2005,and 116.64 in 2006.Suppose also that the price of crude oil is $20 per barrel in 2004,$22 per barrel in 2005 and $24.20 per barrel in 2006.Then the price level has _______ over the entire period 2004-2006,inflation has ________ from the period 2004-2005 to the period 2005-2006,and the relative price of crude oil has ________ during each of periods 2004-2005 and 2005-2006.

Question

Quizplus · Accepted Answer

The price level, indicated by the CPI, has increased from 100 in 2004 to 116.64 in 2006. Inflation has been stable as the percentage increase in CPI is the same (8%) from 2004-2005 and 2005-2006. The relative price of crude oil has increased each year, as the price per barrel increased from $20 to $22 to $24.20.

Suppose the Consumer Price Index (CPI)is 100 in the Year