As a first step in computing the consumer price index (CPI), a survey of consumers is done to determine the “basket of goods” purchased by a typical consumer. Suppose that 2009 is given as the base...

 As  a  first  step  in  computing  the  consumer  price  index  (CPI),  a   survey  of consumers is done  to  determine the  “basket  of  goods”  purchased  by  a  typical  consumer.   Suppose that  2009    is given as the   base  year  and,  consistent  with  the  data  shown  in  the   table above,  it was decided  that  the  basket  of  goods  in  this economy  should  consist  of  one unit of food and two units of clothing.

I. Using 2009 as the base year,what  is  the  CPI  in  each  year:  2009,  2010,  and  2011?

ii. What is the inflation rate in 2010 and 2011?

Extracted text: Quantity of Food Price of Clothing Quantity of Clothing Year Price of Food 2009 (base year) $2 1 $1 2 2010 $4 $4 S2 2 2011 $2