The table below shows the price index for Zimbabwe starting in 2000. $$\begin{array} { | c | c | }
\hline \text { Year } & \text { Price Index } \
\hline 2000 & 100.0 \
\hline 2001 & 173.4 \
\hline 2002 & 404.37 \
\hline 2003 & 1880.5 \
\hline 2004 & 8462.2 \
\hline 2005 & 28,586.6 \
\hline 2006 & 319,222.5 \
\hline
\end{array}$$
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Which of the following statements correctly describe the behavior of prices in Zimbabwe?
i. The cost of the CPI basket increased.
iI. The inflation rate was 73.4 percent between 2000 and 2001.
A) I only
B) II only
C) both I and II
D) neither I nor II

Question

The table below shows the price index for Zimbabwe starting in 2000. $$\begin{array} { | c | c | } 
\hline \text { Year } & \text { Price Index } \
\hline 2000 & 100.0 \
\hline 2001 & 173.4 \
\hline 2002 & 404.37 \
\hline 2003 & 1880.5 \
\hline 2004 & 8462.2 \
\hline 2005 & 28,586.6 \
\hline 2006 & 319,222.5 \
\hline
\end{array}$$
www.econstats.com
Which of the following statements correctly describe the behavior of prices in Zimbabwe?
i. The cost of the CPI basket increased.
iI. The inflation rate was 73.4 percent between 2000 and 2001.
A) I only
B) II only
C) both I and II
D) neither I nor II

Quizplus · Accepted Answer

i. The price index increased significantly between 2000 and 2006, indicating a general increase in the price of goods and services in Zimbabwe. Therefore, the cost of the CPI basket must have also increased.
ii. To calculate the inflation rate, we compare the price index for 2001 with that of the previous year (2000). In this case, we have (173.4-100)/100 = 0.734 or 73.4% inflation rate between 2000 and 2001. Therefore, statement II is also true.

The Table Below Shows the Price Index for Zimbabwe Starting