In this Assignment, you will deal with how to measure the...

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[204] Unit 5 Assignment Template In this Assignment, you will deal with how to measure the cost of living and rate of unemployment in the economy. Economists measure prices in the macroeconomy to generate a consumer price index (CPI) and, then employ the CPI to compare dollar figures from different points in time and to adjust interest rates for inflation. This helps measure the change in the cost of living. The labor market is also introduced, and enables us to see how full utilization of labor resources improves the level of production and the standard of living. Economists measure the performance of the labor market using unemployment statistics. 1) Assume there is a simple economy where people consume only two goods, food and clothing. Further assume that the market basket of goods used to compute the CPI consists of 100 units of food and 20 units of clothing. Yearly Price per Unit Food Clothing 2004 price per unit $8 $20 2005 price per unit $12 $40

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