Question

Inflation and Interest Rates: Tutorial
22 of 25
Save & Exit
Question
Consider a simple economy where the basket of goods used to calculate the CPI contains two items shampoo and soap.
The basket consists of 1 bottle of shampoo and 2 bars of soap. The prices are shown in the table.
Year Price of a Bottle of Shampoo Price of a Bar of Soap
Year
36 50
$1.25
Year
$5.00
$1.30
Type the correct answer in the box. Round your answers to two decimal places, if necessary.
The CPI for year 2 is
Submit

Answer 1

Answer:102.22

Step-by-step explanation:

Answer 2

Answer:

2.22%

Step-by-step explanation:

Recall that year 1, the base year, has a CPI of 100.

From question 1, we know that the CPI of year 2 is 102.22.

To find the rate of inflation, find the percent change from year 1 to year 2:

102.22-100= 0.0222, or 2.22%

_________

    100