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Bus 1104 Written Assignment Unit 3
Bus 1104 Written Assignment Unit 3
Bus 1104 Written Assignment Unit 3
Cognate Strategies
Introduction
understand how it is calculated. This paper aims to demonstrate how to calculate total
expenditure, consumer price index (CPI), and inflation rate using the provided production items
table.
Production Items
Base Year Price
Product Quantity Price (2021) Price (2022)
(2011)
Burritos 10 $1.00 $1.50 $1.75
Flashlights 15 5.00 7.00 6.75
Golf Balls 8 2.00 3.00 3.50
Total Expenditure
Total expenditure is the sum of the quantities of each good multiplied by their respective prices
Likewise, the total expenditure for 2022 is obtained by multiplying the quantities of each good
by their respective prices as follows:
CPI measures the average change in prices consumers pay for goods and services over
time relative to a base year. Calculating CPI involves dividing the current year's total expenditure
by the base year's total expenditure and then multiplying by 100 (Fernando, 2023). In this case,
= ($144.00/$53.00) x 100
= 271.70
= ($146.75/$53.00) x 100
= 276.89
Rate of Inflation
The rate of inflation for a given period is the percentage increase in the CPI between that
period and the previous one (EconPort, Calculating Inflation With Price Indexes, n.d.).
Therefore, to calculate the rate of inflation for 2022, we use the following formula:
Substituting the values we have calculated, the inflation rate for 2022 is:
= 1.92%
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Conclusion
Now I have demonstrated how to calculate total expenditure, CPI, and the rate of
inflation using the provided production item table. The calculations show that the CPI increased
from 271.70 in 2021 to 276.89 in 2022, indicating an inflation rate of 1.92%. Such calculations
are critical in understanding the effect of inflation on an economy, which is useful for policy-
References
https://openstax.org/details/books/principles-macroeconomics-2e
Fernando, J. (2023, August 11). Consumer Price Index (CPI) Explained: What It Is and How It's
https://www.econport.org/content/handbook/Inflation/Price-Index/CalcwPI.html
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References