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ECON $105$

Assignment #$2$

$[5$ marks$]$ Suppose the economy of Macroland produces and consumes only two goods: bread and milk. The following table shows quantities produced and consumed and prices for three years: Year $0,$ Year $1,$ and Year $2.$ Show your work! Keep at least two decimals for your calculations.

$\backslash$table$[[,$Year $0,$Year $1,$Year $2],[$Quantity$,$Price,Quantity,Price,Quantity,Price$],[$Bread$,100$ loaves,$$1\mathrm{.}50/$loaf$,110$ loaves,$$1\mathrm{.}80/$loaf$,120$ loaves,$$2\mathrm{.}50/$loaf$],[$Milk$,180$ litres,$$1\mathrm{.}00/$litre$,220$ litres,$$1\mathrm{.}40/$litre$,250$litres,$$1\mathrm{.}80/$litre$]]$

a$)$ Use Year $1$ as the base year to calculate the CPI for each year.

CPI for Year $0=$ I I

b$)$ Use Year $1$ as the base year to calculate the GDP deflator for each year.

c$)$ According to the CPI, what's the inflation rate in Year $1?$

d$)$ According to the GDP deflator, what's the inflation rate in Year $1?$