If the total expenditures of a typical family equaled $40,000 per year in 2015 and the exact same basket of goods and services cost $45,000 in the year 2017, the family's cost of living:
A)increased by 11.1 percent.
B)decreased by 11.1 percent.
C)decreased by 12.5 percent.
D)increased by 12.5 percent.

Question

Quizplus · Accepted Answer

The percentage change in the CPI is computed by taking the current price of the basket divided by the historic price of the basket and then subtracting 1. In this case, ($45,000/$40,000)- 1 = 0.125, or a 12.50 percent increase.

If the Total Expenditures of a Typical Family Equaled $40,000