Use the table below to answer the following questions.
Table 21.3.1
Suppose a simple economy produces three goods only.
The price and output data for some selected years are shown below.

-Refer to Table 21.3.1. The reference base period is 2002. Which one of the following statements is true?
A)From 2002 to 2014, the cost of the market basket rose by 58 percent.
B)It costs 158 times more in 2014 than it does in 2002 to buy the same market basket.
C)All prices have risen by the same amount.
D)The inflation rate in 2014 is greater than the inflation rate in 2002.
E)The inflation rate in 2002 is greater than the inflation rate in 2014.

Question

Use the table below to answer the following questions.
Table 21.3.1
Suppose a simple economy produces three goods only.
The price and output data for some selected years are shown below.
 
-Refer to Table 21.3.1. The reference base period is 2002. Which one of the following statements is true?
A)From 2002 to 2014, the cost of the market basket rose by 58 percent. 
B)It costs 158 times more in 2014 than it does in 2002 to buy the same market basket. 
C)All prices have risen by the same amount. 
D)The inflation rate in 2014 is greater than the inflation rate in 2002. 
E)The inflation rate in 2002 is greater than the inflation rate in 2014.

Quizplus · Accepted Answer

The table shows that the index number for the market basket in 2014 is 158, which means that the cost of the market basket in 2014 is 158 percent of the cost in the base year (2002). Therefore, the cost of the market basket rose by 58 percent (or 1.58 - 1 = 0.58 = 58%) from 2002 to 2014. Option B is incorrect because it incorrectly states that the cost of the market basket is 158 times more in 2014 than in 2002, when it is actually 1.58 times more. Option C is incorrect because the table shows that the prices for the three goods have not risen by the same amount (e.g., the price of good C has more than doubled between 2002 and 2014). Options D and E are incorrect because the question does not provide enough information to compare the inflation rates in 2002 and 2014.

Use the Table Below to Answer the Following Questions