Question

Refer to the gure below Use the item weights in the figure to determine the percentage changes in the CPI that would result from a a. 9 percent increase in Insurance and pensions prices b 5 percent decrease in Housing prices 10 percent increase in Transportation prices (Note: Review the table titled "Computing Changes in the CPP in your text for assistance) Instructions: Enter your responses as a percentage rounded to two decimal places. If you are entering any negative numbers be sure to include a negative sign in front of these numbers 0.19

Answer 1

a. Item weight of insurance and pensions = 0.113

Inflation in insurance and pensions = +9%

Impact of CPI inflation = Item weight x Item inflation = 0.113 x 9% = 1.02%

b. Item weight of Housing = 0.329

Inflation in Housing = -5%

Impact on CPI inflation = Item weight x Item inflation = 0.329 x (-5%) = -1.64%

c. Item weight of transportation = 0.170

Inflation in transportation = 10%

Impact on CPI inflation = Item weight x Item inflation = 0.170 x 10% = 1.70%