Suppose that the total expenditures for a typical household in 2010 equaled $5,500 per month, while the cost of purchasing exactly the same items in 2015 was $6,875.If 2010 is the base year, the CPI for the year 2015 equals:
A)0.80
B)1.00
C)1.20
D)1.25

Question

Quizplus · Accepted Answer

The Consumer Price Index (CPI) is calculated by dividing the cost of the market basket in the current year by the cost in the base year and then multiplying by 100. Here, CPI = ($6,875 / $5,500) * 100 = 1.25 * 100 = 125.

Suppose That the Total Expenditures for a Typical Household in 2010