If the price of clothing (which accounts for 5 percent of total expenditures in the CPI basket), rises by 10 percent in one year while the prices of all other goods remain constant, by how much will the CPI rise?

Question

Quizplus · Accepted Answer

The CPI will rise by 0.5 percent because the increase in clothing prices (10 percent) affects only the portion of the CPI basket that clothing represents (5 percent). Therefore, the overall impact on the CPI is 10% of 5%, which equals 0.5%.

If the Price of Clothing (Which Accounts for 5 Percent