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1 suppose an economy produces and consumes only two goods...

Question: 1 suppose an economy produces and consumes only two goods...

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1. Suppose an economy produces and consumes only two goods, h The following table shows quantities consumed and prices for th ouses and entertanment. ree years: Item Year 1 Year 2 Year 3 Quantity Price Quantity (units) (S/unit) units (S/unit) units (S/unit) Price Quantity Price Houses 1,000 280 900 295 1,050 297 Entertainment 700 24 780 25 785 25 i. Compute the CPI for Year 3, using Year 2 as the base year ii. Compute the CPI for Year 2, Using year 2 as the base year ii. Use your CPI estimates to calculate the rate of inflation between Year 2 and Year 3

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