HomeworkLib
Question

A typical family in an island economy consumes only apples, bananas and cloth. The base period...

A typical family in an island economy consumes only apples, bananas and cloth. The base period is year 1. Prices in the base period are $2 per pound for applies. $3 per pound for bananas and $5 per yard of cloth. The typical family spends $40 on apples, $45 on bananas, $25 on cloth. In year 2, apples cost $3 per pound and cloth costs $8 per yard. Calculate the economy's Consumer Price Index for year 2 and the inflation rate between year 1 and year 2

business   economics   
0 0
Add a comment Improve this question Transcribed image text
Next > < Previous
Sort answers by oldest

Homework Answers

Answer #1

Expenditure in Year 1
$40+45+25 = 110

Q of apples = 40/2 = 20

Q of bananas = 45/3=15

Q of cloth = 25/5=5

Expenditure in year 2 :

20x3+15x3+5x8=60+45+40 = 145

CPI in Year 2: 145/110x100 = 131.81

Inflation rate = Current CPI-Base year CPI/Base year CPI x 100

=131.81-100/100x100 = 31.8%

0 0
Add a comment
Know the answer?
Add Answer to:
A typical family in an island economy consumes only apples, bananas and cloth. The base period...
Your Answer:

Post as a guest

Your Name:

What's your source?

Earn Coins

Coins can be redeemed for fabulous gifts.

Log In

Sign Up

Not the answer you're looking for? Ask your own homework help question. Our experts will answer your question WITHIN MINUTES for Free.
Similar Homework Help Questions

  • A typical family living on Sandy Island consumes only apple juice, bananas, and material for clothes...

    A typical family living on Sandy Island consumes only apple juice, bananas, and material for clothes (cloth). Prices in the base year are R4 per litre of apple juice, R6 a kilo for bananas, and R5 per meter for cloth. In the base year, a typical family spends R80 on apple juice, R90 on bananas, and R50 on cloth. In the current year, apple juice costs R3 per litre, bananas cost R10 per kilo, and cloth costs R7 per meter....

  • A typical family on Sandy Island consumes only juice and cloth. Last year, which was the...

    A typical family on Sandy Island consumes only juice and cloth. Last year, which was the base year, the family spent $14 on juice and $8 on cloth. In the base year, juice was $2 a bottle and cloth was $2 a length. This year, juice is $6 a bottle and cloth is $7 a length. Calculate a. The CPI basket b. The CPI in the current year c. The inflation rate in the current year Question Help & 5.3...

  • An island economy consumes only jellybeans, running shoes, Pepsi, and Vanilla ice compact discs. The base...

    An island economy consumes only jellybeans, running shoes, Pepsi, and Vanilla ice compact discs. The base year is 2010. Prices in the base period were $2 per bag of jelly beans, $60 per pair of running shoes, 50 cents per can of Pepsi, and $10 per vanilla ice CD. The amounts purchased were 250 bags of jellybeans, 10 pairs of running shoes, 1000 cans of Pepsi, and 40 Vanilla ice CDs during 2010. In 2013, jellybeans cost $1 per bag,...

  • Fruitland is a closed economy that always produces and consumes 50 apples and 50 bananas. Initially...

    Fruitland is a closed economy that always produces and consumes 50 apples and 50 bananas. Initially both apples and bananas cost $1 each. Then demand shifts, so the price of apples doubles to $2 and the price of bananas halves to 50 cents, but production and consumption of apples and bananas stays the same. Calculate the effect on: Nominal GDP, Real GDP, the GDP Deflator, and the Consumer Price Index.

  • Suppose a typical family in Bananaland consumes only three goods: bananas, sunscreen and gasoline. Each year...

    Suppose a typical family in Bananaland consumes only three goods: bananas, sunscreen and gasoline. Each year the typical familypurchases 100 kilos of bananas, 50 bottles of sunscreen and 150 litres of gasoline. The following table shows the prices of bananas, sunscreen and gasoline for 3 years. 2006 2007 2008 Bananas (price per kilo) $1.80 Sunscreen (price per bottle) $2.00 Gasoline (price per litre) $0.80 Rounded to one decimal point, the CPI for 2008 is $2.00 $2.10 $1.00 $2.20 $2.15 $0.90...

  • 2 3 Consider an economy that produces only three types of fruit: apples bananas, and oranges....

    2 3 Consider an economy that produces only three types of fruit: apples bananas, and oranges. In the base year (a few years ago), the production and price data are listed in the tables to the right. Base Year Quantity Fruit Apples Bananas 5,000 bunches Oranges Price 3,000 bags In the base year, nominal GUP was s In the current year, nominal GDP is $ (Round both answers to the nearest whole number.) $2 per bag $3 per bunch $5...

  • Please help. Thank you!!! 1. A certain economy produces only 2 goods, apples and bananas. The...

    Please help. Thank you!!! 1. A certain economy produces only 2 goods, apples and bananas. The quantity produced and price of each is given below in several years. Apples-Q 50 60 70 Apples-P 6 7 8 Bananas-Q 100 105 110 Year 2001 2002 2003 Bananas-P 1.5 Let the CPI basket be 1 apple and 2 bananas. Using 2002 as the base year. Calculate the CPI NGDP and RGDP for each year a. b. What causes inflation?

  • Question 13 (8 points) The economy produces only two general types of products: Apples, and Bananas....

    Question 13 (8 points) The economy produces only two general types of products: Apples, and Bananas. Price and Quantity information of these items over a period are shown below: Year 2019 Product Output Unit Average Price per Output Apples 7 $10 12 Bananas 16 15 7 Using year 2020 as the base year, Year 2020 Average Price per Unit $16 20 %. Growth rate of Nominal GDP from year 2019 to year 2020 is (Cut off at the first decimal...

  • Consider an economy that produces and consumes apples and computers as shown in the table below:...

    Consider an economy that produces and consumes apples and computers as shown in the table below: Good 2019 | Quantity Price 500 $ 2 5 $1,000 2020 Quantity Price 550 $3 $1,000 Apples Computers a. Using 2019 as the base year, compute nominal GDP and real GDP for both years. b. Utilizing the growth rates in both nominal and real GDPs, estimate the inflation rate for 2020.

  • 1 Base Year Fruit Apples Bananas 7,000 bunches Oranges Quantity Price $2 per bag $3 per...

    1 Base Year Fruit Apples Bananas 7,000 bunches Oranges Quantity Price $2 per bag $3 per bunch $5 per bag 4,000 bags 7,000 bags Current Year Fruit Quantity Apples Bananas 15.000 bunches Oranges Price $3 per bag $2 per bunch $7 per bag 5,000 bags 28,000 bags Consider an economy that produces only three types of fruit: apples bananas, and oranges. In the base year (a few years ago), the production and price data are listed in the tables to...

ADVERTISEMENT
Free Homework Help App
Download From Google Play
Scan Your Homework
to Get Instant Free Answers
Need Online Homework Help?
Ask a Question
Get Answers For Free
Most questions answered within 3 hours.
ADVERTISEMENT
ADVERTISEMENT