Question 1
The Consumer Price Index (CPI) is a measure of the average change in prices over time for a basket of goods and services. Calculate the cost of basket and CPI for the years 2019 to 2021 based on the following information:
The year 2019 is the base year. Use a weight of 25 for bananas, 12 for electricity, and 5 for a doctor’s visit.
| Year | Price of bananas (1lb) | Price of electricity (1,000 kWh) | Price of a doctor’s visit | Cost of basket | CPI |
| 2019 | $0.57 | $120 | $80 | ||
| 2020 | $0.57 | $130 | $82 | ||
| 2021 | $0.62 | $140 | $85 |
Question 2
Calculate the rate of inflation for 2020 and 2021.
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