The price of a basket of goods in 2000 was $500. If the same basket cost $600 in 2002, identify the correct statement from the following.
A) The price index in 2002 must have been 100 points higher than in 2000.
B) The price increase between 2000 and 2002 was 10%.
C) If 2000 is considered the base year, then the price index in 2002 must have been 120.
D) If 2002 is considered the base year, then the price index in 2000 must have been 70.

Question

Quizplus · Accepted Answer

The price index for a given year is calculated as (Price of basket in given year / Price of basket in base year) * 100. If 2000 is the base year, then the price index in 2002 is (600 / 500) * 100 = 120.

The Price of a Basket of Goods in 2000 Was