Question

Suppose that people consume only three goods, as shown in this table: Tennis Balls Golf Balls...

Suppose that people consume only three goods, as shown in this table:

Tennis Balls Golf Balls Bottles of Gatorade
2017
Price $2 $4 $1
Quantity 100 100 200
2018
Price $2 $6 $2
Quantity 100 100 200

Complete the following table by computing the percentage change in price for each of the three goods.

Tennis Balls Golf Balls Bottles of Gatorade
Percentage Change

Using a method similar to that used to calculate the consumer price index, the percentage change in the overall price level is.

True or False: If you were to learn that a bottle of Gatorade increased in size from 2017 to 2018, that information would raise your estimation of the inflation rate.

True

False

True or False: If you were to learn that Gatorade introduced new flavors in 2018, that would imply that the inflation rate you estimated is overstated.

True

False

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