In an economy, the total expenditures for a market basket of goods in year 1 (the base year) was $5,000 billion. In year 2, the total expenditure for the same market basket of goods was $5,500 billion. What was the Consumer Price Index for the economy in year 2

Question

Business

Marcus Wu

26 March, 16:15

In an economy, the total expenditures for a market basket of goods in year 1 (the base year) was $5,000 billion. In year 2, the total expenditure for the same market basket of goods was $5,500 billion. What was the Consumer Price Index for the economy in year 2

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Answers (1)

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Amelia Kelly · Answer 1

CPI = 110

Explanation:

The consumer price index (CPI) measures the general change in prices for a basket of goods and services in an economy over time. The basket of goods and services is representative of consumer spending in the economy.

The formula for calculating CPI with a base year is as below.

consumer price index = cost of the market basket in a given year x100

cost of a market basket at the base

In this case,

CPI = $ 5500 x 100

$ 5000

CPI = 11 x 100

CPI = 110