Refer to the table below that contains information about the Consumer Price Index in Mythopia, in order to answer the question

Economics Nov 28, 2020

Refer to the table below that contains information about the Consumer Price Index in Mythopia, in order to answer the question. Year Consumer Price Index 2010 100,0 2011 112,1 2012 120,8 The unit of currency in Mythopia is the Myth. Between 2010 and 2012, the purchasing power of the consumer’s Myth (4 marks) A Decreased to 20,8 cents. B Decreased to 120,8 cents. C Decreased to 83 cents. D Decreased to 93 cents.

Expert Solution

Ans - A) Decreased to 20.8 cents.

Explanation:

CPI in 2010 = 100.0

CPI in 2012 = 120.8

Inflation =[ (CPI 2012 - CPI 2010) / CPI 2010 ]*100

= [ (120.8 -100) /100]*100

= 20.8%

If the inflation rate is 20.8% so it means that, between 2010 and 2012, the purchasing power of the consumer’s Myth, decreased to 20.8 cents.

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