Calculate the inflation rate between 2012 and 2013 using the CPI approach.
Inflation data
| Year | Price of
Books $ |
Quantity of Books | Price of Pencils $ | Quantity of Pencils | Price of Pens $ | Quantity of Pens |
| 2011 | $50 | 10 | 1.00 | 100 | $5 | 100 |
| 2012 | $50 | 12 | 1.00 | 200 | $10 | 50 |
| 2013 | $60 | 12 | 1.50 | 250 | $20 | 20 |
The Inflation data above shows the prices and the quantities consumed in a college bookstore. Using 2011 as the base year
Question 2B.
Calculate the inflation rate between 2012 and 2013 using the CPI approach.
Calculate inflation using the GDP deflator index; explain why consumer price index (CPI) overstates inflation when compared to inflation rate determined by using GDP deflator.
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