our first job after graduation is in the statistical office of the small country Exemplia, where most people are employed in olive groves and love eating olives. Based on the most important transactions in Exemplia summarised in below table, you are tasked with calculating the consumer price index with base year 2020. 2020 2021 Price Quantity Price Quantity Olives (domestic consumption) 2 2,000 2.20 2,100 Olives (export) 2 4,000 2.20 3,600 Potatoes imported 1 1,000 1 800 Government‘s purchase of pencils 0.50 10,000 1 6,000 Olive picking machines (imported) 100 10 110 10 a) Determine a suitable basket. b) Using basket from your answer to question (a), calculate the CPI for 2020 and 2021, and the inflation rate for 2021. c) Briefly discuss the most important differences between the calculation of the CPI and the GDP deflator and their consequences.
Your first job after graduation is in the statistical office of the small
country Exemplia, where most people are employed in olive groves and love eating olives. Based
on the most important transactions in Exemplia summarised in below table, you are tasked with
calculating the
2020 2021
Price Quantity Price Quantity
Olives (domestic consumption) 2 2,000 2.20 2,100
Olives (export) 2 4,000 2.20 3,600
Potatoes imported 1 1,000 1 800
Government‘s purchase of pencils 0.50 10,000 1 6,000
Olive picking machines (imported) 100 10 110 10
a) Determine a suitable basket.
b) Using basket from your answer to question (a), calculate the CPI for 2020 and 2021, and
the inflation rate for 2021.
c) Briefly discuss the most important differences between the calculation of the CPI and the
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