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Economists in the Statistics Bureau decide to check the CPI substitution bias. To do so. they conduct a Consumer Expenditure

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Answer #1

CPI in 2015 = 100

Value of basket in 2015 = 15 x 2 + 35 x 4 = 170

Value of the basket in 2016 = 15 x 2 + 35 x 5 = 205

CPI in 2016 = CPI in 2015 x Value of basket in 2016 / Value of basket in 2015

CPI in 2016 = 120.6

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