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Calculate the inflation rate in year

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Reference no: EM131344825

Assume a two-good world in which the market basket is 10 units of good A and 2 units of good B. Good A costs $4 and good B costs $1 in year.

Furthermore, assume that in year 2 the prices rise to $5 and $2, respectively. Calculate the inflation rate in year 2. Will the choice of base year affect your answer?

Reference no: EM131344825

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