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Explain how the Consumer Price Index is calculated. The average person in 2010 buys 10 apples...

  1. Explain how the Consumer Price Index is calculated.
  2. The average person in 2010 buys 10 apples at $4 each, and 10 bananas at $6 each. In 2011 apples rise to $5 each and bananas rise to $7 each. Calculate the inflation rate.
  3. Explain one reason why the CPI might be biased, and whether it would overestimate or underestimate inflation.
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Answer #1

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