Question

Henry is an economist and wants to understand the relationship between inflation and consumer spending habits. For his research, he needs the Consumer Price Index for 2014 and the inflation rate. Based on the prices of goods given, what will he find to be the CPI and inflation rate for 2014? Assume that a consumer’s basket for three consecutive years consists of the following: Year Price of an Apple Number of Apples Consumed Price of an Orange Number of Oranges Consumed 2012 2 3 3 2 2013 3 2 4 1 2014 5 1 5 2 Consider 2012 to be the base year. A. 100 CPI, 49.56 percent inflation B. 165 CPI, 45.40 percent inflation C. 185 CPI, 55.35 percent inflation D. 175 CPI, 60.56 percent inflation E. 125 CPI, 50.60 percent inflation

Answer 1

In order to find CPI and inflation rate for 2014.

First of all, we will find the price of the consumption basket in the base year.

Next, multiply ... The CPI for any year is given by the formula.

The inflation rate is the percent change in the CPI .”