The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows:
A)Choose a base year, update the basket, find the prices, estimate the basket's cost, compute the index, and compute the inflation rate.
B)Choose a base year, fix the basket, find the prices, compute the inflation rate, compute the basket's cost, and compute the index.
C)Fix the basket, find the prices, compute the basket's cost, choose a base year and compute the index, and compute the inflation rate.
D)Fix the basket, find the prices, compute the inflation rate, compute the basket's cost, and choose a base year and compute the index.

Question

Quizplus · Accepted Answer

The correct sequence for calculating the consumer price index (CPI) and the inflation rate starts with fixing the basket of goods and services to understand what items consumers are buying. Then, the prices of these items are found for the current and base years. The next step is to compute the cost of this basket in both periods. After that, a base year is chosen to compare the current costs against, and the CPI is computed. Finally, the inflation rate is calculated by comparing the CPI over different periods.

The Steps Involved in Calculating the Consumer Price Index and the Inflation