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CPI Calculation and Inflation Analysis

The homework assignment focuses on inflation calculations using consumer price indexes (CPI) and expenditures in the Czech Republic and Country Alpha. It includes tasks such as filling tables with data, calculating CPI, inflation rates, and real interest rates, as well as discussing limitations of CPI. The assignment is structured with specific questions and marks allocated for each part.

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13vivaann
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26 views3 pages

CPI Calculation and Inflation Analysis

The homework assignment focuses on inflation calculations using consumer price indexes (CPI) and expenditures in the Czech Republic and Country Alpha. It includes tasks such as filling tables with data, calculating CPI, inflation rates, and real interest rates, as well as discussing limitations of CPI. The assignment is structured with specific questions and marks allocated for each part.

Uploaded by

13vivaann
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Homework – Inflation

Max Marks: 21

Qs. 1 Answer the question:

(a) Fill the above table. [3]

Qs. 2 The data in Table 2 below show the prices of the items included in the basket of goods
that the typical consumer in the Czech Republic buys in Czech Koruna (CZK), the currency of
the Czech Republic. The quantities purchased are used as weights.

Table 3 below shows the cost of the basket of goods that the typical consumer in the Czech
Republic buys in 2018 and in 2020 in CZK as well as the consumer price index (CPI) for 2019.
(a.i)

Using Table 2, calculate the expenditures of the typical consumer in the Czech Republic in
2019. Enter your results in Table 3. [1]

([Link])

Using Table 4 and assuming 2018 is the base year, calculate the CPI for the Czech Republic for
2020. Enter your results in Table 4. [1]

([Link])

Using Table 4, calculate the rate of inflation in the Czech Republic for 2019 and for 2020. [2]

([Link])

Using your answer to part ([Link]), calculate the real rate of interest in 2019, given that the nominal
interest rate was 12.44%. [1]

(a.v)

Explain two limitations of using the CPI to measure inflation. [4]

Qs. 3 Table 5 provides information required for the calculation of a consumer price index (CPI). It
shows a typical basket of goods purchased by the citizens of Country Alpha and the prices
of these goods for two consecutive years. Assume 2015 is the base year, when the cost of
the typical basket was $45.00.

(a.i)

Calculate the cost of the typical basket in 2016. [2]

([Link])

The cost of the typical basket was $50 in 2017. Calculate the consumer price index (CPI) for
2017. [1]

([Link])

The consumer price index for 2014 was 101.23. Calculate the rate of inflation between 2014 and
2015 (the base year). [1]
Table 6 provides selected economic data for Country A.

(b.i)

In 2019, nominal GDP was $102 874.55 million. Using data from Table 6, identify whether
Country A experienced inflation or deflation or disinflation in 2019. [1]

([Link])

Using data from Table 6, state the reason why there is a difference between the real GDP growth
rate and the real GDP per capita growth rate between 2015 and 2019. [1]

([Link])

An economist forecasts that the real GDP growth rate in 2020 will be 3.41 %. Using the data in
Table 6, calculate the forecast for real GDP ($ million) in 2020. [2]

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