Suppose that the total expenditures for a typical household in 2015 equaled $5,500 per month, while the cost of purchasing exactly the same items in 2017 was $6,875. If 2015 is the base year, the CPI for the year 2017 equals:
A)0.80
B)1.00
C)1.20
D)1.25

Question

Quizplus · Accepted Answer

CPI is calculated by taking the current price of the basket and dividing it by the historical price of the basket. In this case, $6,875/$5,500 = 1.25.

Suppose That the Total Expenditures for a Typical Household in 2015