Unformatted text preview: economics rather than anthropology. 3. Assume we live in a world with three goods: Ice cream, root beer, and tuna sandwiches. Suppose that in 2008 the typical consumer buys 4 half-gallons of ice cream, 10 bottles of root beer, and 20 tuna sandwiches each month. In 2008, a half-gallon of ice cream cost $2.50, a bottle of root beer cost $1.50, and a tuna sandwich cost $3.00. a. What does the typical market basket cost? b. Suppose that prices change in 2009 so that ice cream costs $4.00, root beer costs $2.25, and tuna sandwiches cost $2.50. Construct a CPI for the two years and compute the rate of inflation. c. Why might your answer in part (b) misstate the true change in the cost of living?...
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- Fall '08
- Macroeconomics, $1 million, $1.50, $4.00, $3.00, $2.25