Question

what is the core inflation

STAH detto ... Q education.com 335D Chapter Wed 11:05 PM Q < Question 5 (of 10) 6.00 points Smelte Subm Yeu eld not receive credit for this question in a previous atten Use the data in the table below to calculate core and waters inflation for each time frame indicated below. Assume that each category is weighted equally in the calculation of all-tems Inflation Instructions: Round your answers to the nearest whole number Food and Other goods Core Inflation energy relative to base and services inflation relative to year) base year) 2015 Alms Instructions: Round your answers to one decimal place. Core Inflation 2015-2019 All items inflation -8 % References eBook & Resources Numeria Response Learning Objective 08 04 Calculate the inflation rate by to me and adjust nominal variables worlar a price index

Answer 1

Core inflation is a inflation which excludes food and energy items.

here, core inflation calculations will include only other goods and services.

Also note that base year always has index value of 100.

So core inflation for 2015 will be = price of other goods and services 2015 / base year price level

= (104 -100) / 100  = 4.0%

So core inflation for 2019 will be = price of other goods and services 2019 / base year price level

= (105 -100) / 100 = 5.0%

----------------------

Given that both have weighted equally means 50% is the weight

All items inflation 2015 = weight * core inflation + weight * food and energy inflation

= 50% * (4.0%) + 50% (124-100/100)

= 2.0% + 50% ( 24%)

= 14.0%

All item inflation 2019  = weight * core inflation + weight * food and energy inflation

= 50% * (5.0%) + 50% (103-100/100)

= 2.5% + 50% ( 3%)

= 4.0%

Core inflation 2015-2019 = price of other goods and services 2019 / price of other goods and services 2015

= 105 - 104 / 104  = 0.96%

all-items inflation 2015-2019 = weight * core inflation + weight * food and energy inflation

= 50% * ((105-104)/104) + 50% ((103-124)/124)

= 0.48% + 50% ( -16.94%)

= -8.51%

= -8.5% ( one decimal place)