Question: please solve it Question 3 Maximum Marks: 07 a) Discuss the problems with the Consumer Price Index. (3 Marks) (Word count: 250 words in ax.)

please solve it

Question 3 Maximum Marks: 07 a) Discuss the problems with the Consumer Price Index. (3 Marks) (Word count: 250 words in ax.) b) Consider a nation obsessed with Coke Studio. All they produce and consume are DVDs and karaoke mics, in the following amounts: Karaoke Mics DVDs Quantity Price Quantity Price 2020 10 Rs.4,000 30 Rs. 1,000 2021 12 6,000 50 1,200 a. Using a method similar to the CPI, compute the percentage change in the overall price level. Use 2020 as the base year and fix the basket at 3 DVDs and 1 karaoke mic. (1.5 Marks) b. Using a method similar to the GDP deflator, compute the percentage change in the overall price level. Again, use 2020 as the base year. (1.5 Marks) C. Is the inflation rate in 2021 the same using the two methods? Explain why or why not. (1 Mark)

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