The reference base period is 2002. A consumer price index of 122 in 2014 means that
A)prices of consumer goods have gone up by a factor of 12.2.
B)if the price of a good was $100 in 2002, its price in 2014 is $122.
C)prices of consumer goods have more than doubled.
D)the market basket of consumer goods that cost $122 in 2002 can be purchased for $100 in 2014.
E)the average of the prices paid by urban consumers for a fixed market basket of consumer goods and services was 22 percent higher in 2014 than it was on average during 2002.

Question

Quizplus · Accepted Answer

A consumer price index of 122 in 2014 means that the average of the prices paid by urban consumers for a fixed market basket of consumer goods and services was 22 percent higher in 2014 than it was on average during 2002. It does not mean that prices have gone up by a factor of 12.2 or that prices of consumer goods have more than doubled. It also does not provide information on the price of a specific good. Option D is also incorrect as it states that the market basket of consumer goods that cost $122 in 2002 can be purchased for $100 in 2014, which is not true.

The Reference Base Period Is 2002