In Bovania,milk Constitutes 56 Percent of the Typical Basket of Goods

question 109

Multiple Choice

In Bovania,milk constitutes 56 percent of the typical basket of goods for a typical consumer.Let's say the price of milk rises by 4 percent and the prices of all other goods fall by 10 percent.Based on the information given,we can definitely say

• A) the consumer price index (CPI)in Bovania is greater than in the previous year.
• B) the consumer price index (CPI)in Bovania is less than in the previous year.
• C) if consumers get a 4 percent pay raise,they are worse off in terms of their real income compared to inflation as measured by the Bovanian consumer price index (CPI).
• D) because milk is a necessity,consumers are automatically worse off no matter what pay increase they may have received.
• E) shoe-leather costs have decreased.

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