If the price of housing (which accounts for 40 percent of total expenditures in the CPI basket), rises by 10 percent in one year while the prices of all other goods rises by 27 percent, by how much will the CPI rise?

Question

Quizplus · Accepted Answer

The CPI will rise by 20 percent. This is calculated by taking the weighted average of the price increases, with housing (40% of the basket) increasing by 10 percent and the other goods (60% of the basket) increasing by 27 percent. The calculation is (0.4 * 10) + (0.6 * 27) = 4 + 16.2 = 20.2 percent, which rounds to 20 percent.

If the Price of Housing (Which Accounts for 40 Percent