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(Solved): need it asap!! thx a lot Question 4 (15 marks) Refer to the following tabl ...
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Question 4 (15 marks) Refer to the following table. Suppose the CPI basket consists of 10 pies of pizza and 20 bottles of milk respectively, and 2020 is the base year Year Price of pizza Price of milk 2020 $250 $40 2021 $280 $45 a. Calculate the CPi in 2020 and 2021 respectively. What is the inflation rate in 2021? (6 marks) b. Suppose the minimum wage is $37.5 per hour in 2020, how much would be in 2021 in order to maintain the same purchasing power in 2020? (3 marks) c. Which one do you think is a better measure of a household's cost of living. CPI Or GDP deflator? Why? (6 marks)
Expert Answer
a) No. of pizza=10 Price of pizza in 2020 = $250 No. of bottles of milk= 20 Price of bottles of milk in 2020= $40 For the year 2020=250*10+40*20 =2500+800 =$3300 CPI for 2020=3300/3300*100=100 Price of pizza in 2021= $280 Pri