Given the following relative weights of importance for the major components of the Consumer Price Index...

Given the following relative weights of importance for the major components of the Consumer Price Index or CPI:

	RIW	2016	2017
Food:
Food at home	10.1	148.4	153.3
Food away from home	6.1	138.7	148.6
Alcoholic Beverages	1.6	148.5	151.8

Housing:
Residential Rent	5.5	165.7	171.0
Homeowners Rent	18.9	151.2	155.7
Furnishings, utilities, etc.	18.2	123.7	126.5

Apparel and upkeep	6.5	132.0	138.7

Transportation:
New Vehicles	5.5	139.1	143.0
Used Vehicles	1.4	128.7	131.9
Motor Fuel	4.8	111.6	115.3
Public Transportation	1.4	121.0	123.1
Other	5.7	121.3	122.8

Medical Care	4.4	220.5	235.2
Entertainment	4.8	153.9	159.1
Other Goods and Services	5.1	206.9	215.4

I recommend developing a spreadsheet that addresses the quantitative aspects of parts b and c below. Print a copy and submit the hard copy to me in class along with your answers to the following questions.

What is the CPI and what does it measure?

What is the annual rate of inflation in 2017 as measured by the CPI?

What was your inflation rate in 2017? Please indicated why it differs from the answer in Part (b) above.

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

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