Overestimated or underestimated the inflation rate

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Reference no: EM133126012

In this exercise you are asked to compute the inflation rate according to the Consumer Price Index. Imagine that a country produce four goods: Apples, Oranges, Rice, and Space Satellites. A basket of goods of the typical average family is 10 kg. apples, 20 kg. of oranges, and 50 kg. of rice. The economy is closed. Below you can find the quantity and prices of goods produce in this economy the year 2010, 2011, 2012 for this economy. The number in parenthesis refer to (price, quantity).

Assume that 2010 is the base year. Compute.

1. The Consumer Price Index for the year 2010, 2011, 2012

2. The inflation rate between 2010 and 2011 and between 2011 and 2012. Using the above information the two inflation rates are 18.75% and 15.78%

3. Do you think the inflation rate has overestimated or underestimated the inflation rate in any of the years? Explain

Reference no: EM133126012

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