CPI, rate of inflation, GDP deflator
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Suppose that in 1992 the price and quantity of energy were 1.00 and 50, respectively, and that in 1993 they were 1.04 and 60, respectively. In 1992 the price and quantity of all other consumer goods and services were 1.10 and 40, respectively, and in 1993 they were 1.20 and 30 respectively.
a. Using 1992 as a base year and the 1992 bundle as the typical bundle, what is the CPI in 1993?
b. What is the rate of inflation between 1992 and 1993?
c. Now suppose that these outputs comprise all of GDP.Keeping 1992 as the base year, what is the GDP deflator for 1993?
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The solution calculates CPI, rate of inflation, GDP deflator.
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