Suppose we shopped for a basket of goods in Year 1 and it cost $350.Suppose the same basket of goods costs $385 in Year 2.If the CPI in Year 1 is 100,the CPI in Year 2 will be
A)35.
B)90.
C)100.
D)110.
E)135.

Question

Quizplus · Accepted Answer

We can use the formula for calculating CPI:

CPI = (Cost of basket in current year / Cost of basket in base year) x 100

Using Year 1 as the base year:

CPI in Year 1 = (Cost of basket in Year 1 / Cost of basket in Year 1) x 100 = 100
CPI in Year 2 = (Cost of basket in Year 2 / Cost of basket in Year 1) x 100 = (385/350) x 100 = 110

Therefore, the answer is D) 110.

Suppose We Shopped for a Basket of Goods in Year