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Test Prep For AP® Courses
# Test Prep For AP® Courses

39.

A country’s price index was 102.5 in year 1 and 104.5 in year 2. The inflation rate from year 1 to year 2 is closest to ____________.

- 1.5 percent
- 1.95 percent
- 2 percent
- 2.5 percent
- 4.5 percent

40.

Assume a typical consumer in Country X buys one movie ticket, two oranges, and one pound of butter. The prices of these three goods over several years is shown in the table below.

Year | Price of movie ticket | Price of oranges | Price of butter | Cost of basket of goods | Price index (base year = 2009) |
---|---|---|---|---|---|

2009 | $7 | $0.25 | $0.50 | ||

2010 | $7 | $0.30 | $0.50 | ||

2011 | $7.50 | $0.30 | $0.60 | ||

2012 | $7.50 | $0.30 | $0.75 | ||

2013 | $8 | $0.30 | $0.75 |

- Using the information in the table, calculate the value of the basket of goods for each year. Round your answers to one decimal place.
- Using 2009 as the base year, calculate the price index for each year. Round your answers to one decimal place.
- What was the inflation rate in Country X between 2010 and 2011?
- Suppose that over 2010 and 2011, worker wages increased in Country X by five percent. Using your answer in part c, did the purchasing power of the wage increase or decrease over this time period?

41.

Which of the following can be used to track the change in the average price level after excluding the prices of food and energy?

- Producer Price Index
- Consumer Price Index
- Core Consumer Price Index
- GDP Deflator
- Substitution bias-corrected Consumer Price Index