Answer to Question #84875 in Macroeconomics for Cynthia Porter

Question

With the following information, calculate the price index for year 4. Year 2 has been chosen to be the base year. The basket of goods for this price index includes 53 units of good X and 65 units of good Y.
PRODUCT YEAR 1 YEAR 2 YEAR 3 YEAR 4
Good X 5.5 6.7 14.9 18.2
Good Y 1.1 7.0 3.5 16.4

Answer 1

Price Index=(Current Price Value of Basket)/(Price Value of Basket in Base Year)×100

Price Index=(53×18.2+65×16.4)/(53×6.7+65×7.0)×100=250.6%