Question

Given (CPI):

Good	2017	2018
Q. Beer	50	45
Q. Snacks	100	150
P. Beer	$1.25	$2.00
P. Snacks	$1.10	$1.20

8) Given (CPI):

What is the inflation rate using the Paasche price index between 2017 and 2018?               8) _______

A) 27.5%              B) 22.0%

C) 24.8%               D) none of the above.

9) Given (CPI):

What is the inflation rate using the Fisher's mean between 2017 and 2018?           9) _______

A) 22.0%              B) 27.5%

C) 24.8%               D) none of the above.

Answer 1

8)

	2017		2018
Commodity	Po	Qo	Pn	Qn	PoQo	PoQn	PnQo	PnQn
Beer	1.25	50	2	45	62.5	56.25	100	90
Snaks	1.1	100	1.2	150	110	165	120	180
					172.5	221.25	220	270

Paasche price index is given by

Ip=(270/221.25*100)=122.0339

Inflation=(122.0339/100)-1=22.03%

Correct option is

B) 22.0%

9)

Fisherman index is given by

I_F=[(220/172.50)*(270/221.25)]^0.50*100=124.75

Inflation=(124.75/100)-1=24.75%

Correct option is

C) 24.8%