The table below contains data for the country of Batterland, which produces only
ID: 1174200 • Letter: T
Question
The table below contains data for the country of Batterland, which produces only waffles and pancakes. The base year is 2009.
Prices and Quantities
Year
Price of
Waffles
Quantity of Waffles
Price of Pancakes
Quantity of
Pancakes
2008
$2.00
100
$1.00
100
2009
$2.00
120
$2.00
150
2010
$2.00
150
$3.00
200
2011
$4.00
180
$3.00
220
Refer to Table 1. This country's inflation rate from 2008 to 2009 was
-25%.
25%.
33.3%.
100%.
Year
Price of
Waffles
Quantity of Waffles
Price of Pancakes
Quantity of
Pancakes
2008
$2.00
100
$1.00
100
2009
$2.00
120
$2.00
150
2010
$2.00
150
$3.00
200
2011
$4.00
180
$3.00
220
Explanation / Answer
Ans:
This country's inflation rate from 2008 to 2009 = 33.33%
Analysis
Consumer price index for 2008 = Cost of market basket in current year / Cost of market basket in base year * 100
= (100 * $2 + 100 * $1) / (100 * $2 + 100 * $2)
= ($200 + $100) / ($200 + $200)
= $300 / $400 * 100
= 0.75 * 100
= 75
Consumer price index for 2009 = Cost of market basket in current year / Cost of market basket in base year * 100
= (120 * $2 + 150 * $2) / (120 * $2 + 150 * $2)
= ($240 + $300) / ($240 + $300)
= $540 / $540
= 1 * 100
= 100
This country's inflation rate from 2008 to 2009 = (Consumer price index for 2009 - Consumer price index for 2008) / Consumer price index for 2008
= (100 - 75) / 75
= 25 / 75
= 0.3333 or 33.33%
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