solution - 1 Whatare Answer Thefirststageisto selecttheCPI...

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1) 
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What are  the three stages of constructing the CPI?  Answer:  
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The first stage is to  select the CPI  market basket. The  market basket is  determined by  surveying the  spending habits of  consumers by  conducting a  Consumer  Expenditure Survey.  The second stage is  to check the prices  of about 80,000  goods and services  in 30 metropolitan  areas. This checking  is done on a monthly  basis. The third stage  is to calculate the  CPI itself. To  calculate the CPI, a  period of time is  selected as the base  reference period and  the cost of the CPI  market basket using  the prices from that  period is computed.  Then the CPI in any  other month equals  100 times the  quotient of the cost  of the market basket  using current - period  prices divided by the  cost of the market  basket in the  reference base  period. 
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Topic: CPI  Skill: Level 1: Definition  Objective: Checkpoint 7.1  Author: AA    2) 
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"The  market  basket used to calculate the CPI is revised monthly to more accurately depict consumers' choices. The price data for the  CPI are collected every month." Are the previous sentences true or false?  Answer:  
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The first sentence is  false and the second  is true. The point of  the CPI is to  determine how the  prices of a fixed  basket of goods and  services change over  time, so the CPI  basket is revised  only infrequently.  However, the prices  for the goods and  services in the  market basket are  collected monthly so  that the CPI can be  computed monthly. 
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Topic: CPI, construction  Skill: Level 1: Definition  Objective: Checkpoint 7.1  Author: WM    3) 
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If you  have the  cost of  the CPI market basket at current prices and the cost of the CPI market basket at base period prices, how do you calculate  the CPI?   Answer:  
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 CPI  = (Cost of CPI basket at current prices) (Cost of CPI basket at base period prices) ×  100. 
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Topic: CPI, construction  Skill: Level 1: Definition  Objective: Checkpoint 7.1  Author: TPS    4) 
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What is  inflation and how is it measured using the Consumer Price Index?  Answer:  
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The inflation rate is  the percentage  change in the price  level from one year  to the next. In other  words, it is the  growth rate of the  price level. The CPI  is a measure of the  price level and hence  can be used to  calculate the  inflation rate. The  inflation rate is equal  to: Inflation rate  = (CPI in current year - CPI in previous year) (CPI in previous year) ×  100. 
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Topic: Inflation  Skill: Level 2: Using definitions  Objective: Checkpoint 7.1  Author: DMC   
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5) 
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Assume  that after  you  graduate,  you move  to a  simple economy in which only three goods are produced and consumed: fish, fruit, and meat. Suppose that on January 1, 
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