Suppose the consumer price index (CPI) for Year X is 130. This means the average price of goods and services is
A) currently $130.
B) 130 percent more in Year X than in the base year.
C) 130 percent more in the base year than in Year X.
D) priced at 30 percent more in Year X than in the base year.

Question

Quizplus · Accepted Answer

The CPI measures the price level of goods and services relative to a base year, which is set to have a CPI of 100. Therefore, a CPI of 130 means the average price level has increased by 30 percent since the base year. Option A is incorrect because the CPI is not a measure of currency value, but rather a measure of the price level. Option B is incorrect because it implies that the price level in Year X is 130 percent higher than the price level in the base year, which is not accurate. Option C is incorrect for the same reason as option B.

Suppose the Consumer Price Index (CPI) for Year X Is