Answer to Question #289583 in Macroeconomics for GIGIG

Question

You have an economy where only three goods are produced. The data available for 4 years is displayed as follows: Price for Product A (Year 1 / Year 2 / Year 3 / Year 4) - 100 / 105 / 107 / 110, Price for Product B (Year 1 / Year 2 / Year 3 / Year 4) - 35 / 37 / 34 / 30, Price for Product C (Year 1 / Year 2 / Year 3 / Year 4) – 62 / 60 / 63 / 64, Quantity for Product A (Year 1 / Year 2 / Year 3 / Year 4) – 300 / 307 / 318 / 319, Quantity for Product A (Year 1 / Year 2 / Year 3 / Year 4) – 500 / 515 / 525 / 535, Quantity for Product A (Year 1 / Year 2 / Year 3 / Year 4) – 290 / 270 / 278 / 295. Analyze inflation for the entire economy (include all three products in the overall production) using a Paasche index and use year 2 as basis year and year 3 as current year! with steps of solutions

a.the Paasche index is 1.0294

b.the Paasche index is 1.0160

c.the Paasche index is 0.9863

d.the Paasche index is 0.9985

e. the Paasche index is 1.02735

Answer 1

d.the Paasche index is 0.9985