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28 January, 01:25

Assume the market basket for the consumer price index has two products-bread and milk-with the following values in 2013 and 2018 for price and quantity: The Consumer Price Index for 2018 equals : A. 118 B. 116 C. 86 D. 85

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  1. 28 January, 01:50
    0
    E. None of the above

    Explanation:

    Table 4

    Base Year (2013) 2018 2013 2018

    Product Quantity Price Price Total Amount Total Amount

    Milk 50 $1.20 $1.50 $60 $75

    Bread 100 $1.00 $1.10 $100 $110

    Therefore CPI for 2018 = $75 + $110 = $185
  2. 28 January, 01:51
    0
    B) 116

    Explanation:

    2013 2018

    Product Quantity Price Price

    Milk 50 $1.20 $1.50

    Bread 100 $1.00 $1.10

    price of CPI basket 2013 = (50 x $1.20) + (100 x $1) = $160

    price of CPI basket 2018 = (50 x $1.50) + (100 x $1.10) = $185

    CPI 2018 = ($185 / $160) x 100 = 115.6 ≈ 116

    The CPI measures the price level of a basket of goods compared to a base year, in this case the base year was 2013.
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