Consumers in Beachland Consume Only Two Goods,sodas and DVDs

question 60

Multiple Choice

Consumers in Beachland consume only two goods,sodas and DVDs.If they spend $10 on sodas and $90 on DVDs a month,how many sodas and DVDs are in their CPI market basket if the price of a soda is $1 and the price of a DVD is $9?

• A)9 sodas and 1 DVD
• B)1 soda and 9 DVDs
• C)10 sodas and 9 DVDs
• D)10 sodas and 10 DVDs
• E)It is impossible to determine the market basket without information on the quantity of at least one of the two goods consumed.

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Definitions:

Effective Rate

The actual interest rate of an investment or loan, taking into account the effects of compounding.

Compounded Semi-Annually

Interest calculation method where the interest is added to the principal sum twice a year, causing the interest to earn interest.

Strip Bond

A type of bond where the principal and regular coupon payments have been separated and are sold individually as zero-coupon bonds.

Interest

The cost of borrowing money, typically expressed as a percentage of the borrowed amount, paid by the borrower to the lender.