. Suppose that to calculate the CPI we use three goods: coffee, tea, and diet cola....

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. Suppose that to calculate the CPI we use three goods: coffee, tea, and diet cola. A typical consumer buys 4 pounds of coffee, 6 boxes of tea, and 3 can of diet cola. Prices of these goods are given in the table below for each of three years: YEAR 1 2 3 PRICE OF COFFEE $4.25 $4.75 $5.05 PRICE OF TEA $2.50 $2.72 $ 2.90 PRICE OF DIET COLA $1.50 $1.70 $1.85 VALUE OF MARKET BASKET $36.50 $40.42 $43.15 CPI a. Calculate the CPI and the inflation rate. b. Calculate the CPI and the inflation rate with year 3 the base year 100 110.84 118.49 CPI/INFLATION RATE Assume year 1 is the base year. Calculate the value of the market basket for each year. Remember the basket of goods is the same from year to year. . Suppose that to calculate the CPI we use three goods: coffee, tea, and diet cola. A typical consumer buys 4 pounds of coffee, 6 boxes of tea, and 3 can of diet cola. Prices of these goods are given in the table below for each of three years: YEAR 1 2 3 PRICE OF COFFEE $4.25 $4.75 $5.05 PRICE OF TEA $2.50 $2.72 $ 2.90 PRICE OF DIET COLA $1.50 $1.70 $1.85 VALUE OF MARKET BASKET $36.50 $40.42 $43.15 CPI a. Calculate the CPI and the inflation rate. b. Calculate the CPI and the inflation rate with year 3 the base year 100 110.84 118.49 CPI/INFLATION RATE Assume year 1 is the base year. Calculate the value of the market basket for each year. Remember the basket of goods is the same from year to year.

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To calculate the value of the market basket for each year we need to multiply the quantity of each good by its corresponding price Given the quantitie... View the full answer