Question

Henry is an economist and wants to understand the relationship between inflation and consumer spending habits. For his research, he needs the Consumer Price Index for 2014 and the inflation rate. Based on the prices of goods given, what will he find to be the CPI and inflation rate for 2014?

Answer 1

In order to find CPI and inflation rate for 2014.

First of all, we will find the price of the consumption basket in the base year.

Next, multiply ... The CPI for any year is given by the formula.

The inflation rate is the percent change in the CPI .

Answer 2

Deflation is whereby there is hiking of prices of  commodities as a result of  high demand of  commodities and having excess money in circulation and having  lower values for money.

The relationship between  inflation and consumer spending habits  is that when  people spend more money on commodities definitely the inflation rate will rise since  since  there  will be  more money   in circulation.