(Table 4: Market Basket Prices in Macroland) Table 4 Shows

question 16

Multiple Choice

(Table 4: Market Basket Prices in Macroland) Table 4 shows the cost of a given market basket of goods and services in Macroland over a four-year period. Use this market basket to compute the price index for year 4 if the base year is year 1. The year 4 price index is:
$\begin{array}{l}\text { Table 4: Market Basket Prices in Macroland }\\\begin{array}{|l|l|l|l|l|}\hline & \text { Year 1 } & \text { Year 2 } & \text { Year 3 } & \text { Year 4 } \\\hline \text { Cost of the market basket } & \$ 600 & \$ 640 & \$ 630 & \$ 660 \\\hline\end{array}\end{array}$

• A) 107.
• B) 110.
• C) 4.7%.
• D) 10.0%.

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Definitions:

Arithmetic Operations

Basic mathematical operations which include addition, subtraction, multiplication, and division.

Exponential Decay

A process of reduction in quantity where the decrease is proportional to the current value, often used in science and finance to describe rapidly decreasing phenomena.

Compound Interest

The calculation of interest for deposits or loans that takes into account both the starting principal and previously accrued interest.

Exponential Decay

A process described by a decrease in quantity at a rate proportional to its current value, often observed in radioactive decay and depreciation of assets over time.