### ECO 202 Cram Kit Bundle

Unemployment
Types of Unemployment
Unemployment Measures
Okun’s Law
Misery Index
Economic Measures
Consumer Price Index (CPI)
Gross Domestic Product (GDP)
Gross National Product (GNP)
Potential Output
Money Supply
Stock vs. Flow
Economic Models
Supply & Demand
Aggregate Supply & Aggregate Demand
Economic Gaps
Interest Rates
Interest Rates
Loanable Funds
Comprehensive

# How to calculate CPI

Question: Calculate the CPI based on the following table.

To compute the cost of each basket (of goods X and Y) in the current year and base year...

...we'll use the following formula:

Remember: we want to take quantities from the survey year, not from today or base year.

The Quantity of x and y is always taken from the survey year (this is to ensure we have the same basket of goods we are comparing every year).

Therefore, we'll plug in 10 for Qx...

...and 5 for Qy.

The price for pencils (Px) today is \$6...

...and the price for notebooks (Py) today is \$12.

The prices of x and y in the numerator are based on today's prices.

The price for pencils (Px) in the base year was \$4...

...and the price for notebooks (Py) in the base year is \$8.

The prices of x and y in the denominator are based on the base year's prices.

From here, we can solve for a CPI of 150!