If the Consumer Price Index for a certain year is 120, this means that the average price of consumer items in that year was
A) 20 percent higher than the average price in the base period 1982-84.
B) about $120 per basket of consumer goods and services.
C) 120 percent higher than the average price in the base period 1982-84.
D) 20 percent higher than the average price of the preceding year.

Question

Quizplus · Accepted Answer

The Consumer Price Index (CPI) measures changes in the price level of a weighted average market basket of consumer goods and services purchased by households. A CPI of 120 means that the average price level is 20 percent higher than during the base period (often 1982-84 for the U.S. CPI), not 120 percent higher, not a specific dollar amount per basket, and not necessarily compared to the preceding year unless that year is the base period.

If the Consumer Price Index for a Certain Year Is