Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base year. In 2012, the basket's cost was $77; in 2013, the basket's cost was $82; and in 2014, the basket's cost was $90. The value of the CPI in 2014 was:

A) 109.8 and the inflation rate was 16.9%

B) 116.9 and the inflation rate was 16.9%

C) 116.9 and the inflation rate was 9.8%

D) 109.8 and the inflation rate was 9.8%

Question

Justin Montgomery

Business

10 July, 06:48

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been selected as the base year. In 2012, the basket's cost was $77; in 2013, the basket's cost was $82; and in 2014, the basket's cost was $90. The value of the CPI in 2014 was:

A) 109.8 and the inflation rate was 16.9%

B) 116.9 and the inflation rate was 16.9%

C) 116.9 and the inflation rate was 9.8%

D) 109.8 and the inflation rate was 9.8%

+3

Answers (1)

Know the Answer?

Dee · Answer 1

CPI is consumer price index. It is used to indicate the inflate rate in the economy.

Calculating the CPI is as below

CPI = current basket prices / base year basket price x 100

In this case.

C) 116.9 and the inflation rate was 9.8%

CPI = 90/77 x 100

CPI = 1.16883x 100

CPI = 116.883

CPI = 116.9

Inflation for a period is measured by taking into account the difference in price from the previous periods.

Inflation for 2014 will be price difference between 2014 and 2013.

i. e., 90 - 82

As a percentage,

The inflation will be 92-8 / 82 x 100

= 8/82 x 100

=0.0975 x 100

=9.756

=9.8%