The method used to calculate the CPI assumes that consumers buy
A)relatively more goods with increasing relative prices.
B)goods at discount stores when prices rise.
C)relatively more goods with decreasing relative prices.
D)more computers and fewer black- and- white TVs than in the base year.
E)the same quantities of goods as in the base year.

Question

Quizplus · Accepted Answer

The CPI is calculated by comparing the price of a basket of goods and services in the current year to the price of the same basket of goods and services in a base year. The method assumes that consumers buy the same quantities of goods as in the base year, meaning that the composition of the basket of goods and services does not change. This is why the answer is E – the method assumes that consumers buy the same quantities of goods as in the base year.

The Method Used to Calculate the CPI Assumes That Consumers