th Question: 2. in the Requirements.
(a) The Consumer Price Index is a weighted index, in that a basket of commodities is selected to represent the consumption patterns of consumers and the prices for each of the commodities included in the basket of goods are weighted in relation to their contribution to the overall spending of consumers. The weighted prices of these commodities are determined for a base year and these base prices are summed. This sum for the base year is assigned an index value of 100.
For each succeeding year or lesser period, weighted prices for each of the commodities included in the basket of goods are determined for that period and those prices are summed. The summed weighted prices for the succeeding period then are divided by the summed weighted prices for the base year, and this outcome is multiplied by 100. The result is the index for the succeeding year. In the case in this question, the price index value for 2003 is 106.25 (68/64).
(b) Real output = $260.7 billion ($300/1.15)
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