For the following four questions please use the following table and information. Assume that the CPI...

For the following four questions please use the following table and information. Assume that the CPI base year is 1990 and also assume that the CPI market basket has .04 houses, .1 cars, and 1,500 gallons of gasoline. Please use 1 decimal place in your answers.

Year	House Price	Car Price	Nominal Gasoline Price per Gallon
1990	$150,000	$10,000	$2.00
2000	$210,000	$18,000	$2.10
2010	$225,000	$25,000	$2.30
2019	$250,000	$30,000	$2.50
2020	$252,000	$30,500	$2.70

1- What is the value of the CPI in 1990?

2-What is the value of the CPI in 2020?

3-What is the value of the core CPI in 2020? Hint: what of this market basket would be excluded and what would be included?

4- Say that you wanted to compute the market basket in each of 1990, 2000, 2010, 2019, and 2020. when you compare your calculations, what is kept constant over these years?

a) the prices of goods

b) the number of goods in the market basket

c) nothing

Expert Solution

Rahul Sunny answered 2 years ago

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