Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been chosen as the base In 2012, the basket's cost was $80.00; in 2013, the basket's cost was $84; and in 2014, the basket's cost was $87.60. The value of the CPI was

a. 100 in 2012.

b. 105 in 2013.

c. 109.5 in 2014.

d. All of the above are correct.

Question

Business

Natalya Waters

9 November, 00:34

Suppose a basket of goods and services has been selected to calculate the CPI and 2012 has been chosen as the base In 2012, the basket's cost was $80.00; in 2013, the basket's cost was $84; and in 2014, the basket's cost was $87.60. The value of the CPI was

a. 100 in 2012.

b. 105 in 2013.

c. 109.5 in 2014.

d. All of the above are correct.

+1

Answers (1)

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Annika Watts · Answer 1

d. All of the above are correct.

Explanation:

CPI or consumer price index is a numerical measure of the rate of inflation in a country over time. CPI is calculated with a reference year as the base year.

The CPI for the base year is always set at 100. For the subsequent years, CPI is calculated using the formula below.

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

cost of a market basket at the base

Therefore, in 2012 CPI will be 100 since its base year.

In 2013, the CPI will be

84/80 x 100

=1.05 x 100

=105

In 2014, the CPI

= 87.60 / 80 x 100

=1.095 x 100

=109.5