Suppose a price index is formed to measure changes in the price level between 2005 to 2010.To form a Laspeyres price index,one would
A) compare the cost of the typical basket of goods purchased in 2005 with the cost of the typical basket of goods purchased in 2010.
B) calculate the increase in the cost of the typical market basket purchased in 2005.
C) calculate the increase in the cost of the typical market basket purchased in 2010.
D) take the typical basket of goods purchased in 2007,and compare the costs of that basket in 2005 and 2010.

Question

Quizplus · Accepted Answer

A Laspeyres price index uses the quantities of goods from the base year (2005) and compares the cost of this fixed basket in the base year to its cost in the comparison year (2010).

Suppose a Price Index Is Formed to Measure Changes in the Price