The price index for 2007 is 1.28. What does this mean?

Question

Quizplus · Accepted Answer

The price index measures the average price level relative to a base year, which is generally set to 100. A price index of 1.28 means that prices have increased by 28 percent since the base year. Option A is incorrect because a 128 percent increase would indicate a price index of 2.28. Option B is incorrect as it suggests a small increase of 1.28 percent rather than 28 percent. Option C is incorrect as it suggests that prices in the base year were much lower than in 2007, which is not necessarily the case.

The Price Index for 2007 Is 1