The table below indicates the price and output data over a five-year period for an economy that produces only one good. Refer to the above data.If year 2 is the base year, the price index for year 3 is:
A)120
B)125
C)133
D)150

Question

The table below indicates the price and output data over a five-year period for an economy that produces only one good.  Refer to the above data.If year 2 is the base year, the price index for year 3 is:
A)120 
B)125 
C)133 
D)150

Quizplus · Accepted Answer

To calculate the price index for year 3, we need to find the percentage increase in the price level from year 2 to year 3, and then adjust the base year price to reflect this increase.

Step 1: Find the percentage increase in price level from year 2 to year 3:
(Price level in year 3 - Price level in year 2) / Price level in year 2 * 100
= (150 - 125) / 125 * 100
= 20%

Step 2: Adjust the base year price using the percentage increase:
Price index for year 3 = Base year price * (1 + percentage increase)
= 100 * (1 + 0.20)
= 120

Therefore, the correct answer is C) 133.

The Table Below Indicates the Price and Output Data Over