CPI and Inflation Practice Problems #1
Fill in blanks in table below
Year 1 (2000) Year 2 (2003) Year 3 (2006)
Market Basket Items # of Units $ per unit Total Cost $ per unit Total Cost $ per unit Total Cost
Cheese 2 lbs $1.75 $3.50 $1.50 $ $1.50 $
Blue Jeans 2 pairs $12.00 $ $15.50 $ $20.00 $
Gasoline 10 gallons $1.25 $ $1.60 $ $2.70 $
Total Cost of Basket --------- ------ $ ------ $ ------- $
Using year 1 as our base year, using the formula above to calculate the index for each year:
Year 1 Index = (base year)
Year 2 Index =
Year 3 Index =
Calculate the inflation rate on a percentage basis for the following:
Hint: formula = [(Ending index – Beginning index) / Beginning Index] X 100
Year 1 to Year 2:
Year 1 to Year 3:
Year 2 to Year 3:
Use the table below for the following 2 questions
Year
Nominal GDP
GDP Deflator
Year 3
$5000
125
YEAR 4
$6,600
150
A. What is REAL GDP in Year 3?
B. What is REAL GDP in Year 4?
