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    • Thread Starter

    Admittedly I have missed a couple of lectures on this which might explain the gaps in my knowledge. But any assistance on these questions would be much appreciated, as I really don't know what to do!

    a) Let pt = (pt1, ..... , ptn) denote the price system (i.e. the prices of goods 1 to n) at date t, with t varying
    from 0 to any arbitrary date T .
    Let x = (x1, x2, ..... , xn) be a commodity bundle. What is the value of x at date 0? At date t? What is the level of “inflation” between time 0 and time t for that commodity bundle x?

    b) Define the price index associated with the commodity bundle x? Is such a price index independent of the commodity bundle x? What solution would you propose to obtain a reasonnably accurate measure of "inflation?"

    Thanks in advance!
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Updated: December 2, 2011

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