Suppose a basket of goods and services has been selected to calculate the CPI and Year 1 has been selected as the base year. In Year 1, the basket's cost was $50; in Year 2, the basket's cost was $52; and in Year 3, the basket's cost was $55. The value of the CPI in Year 3 was

Question

Quizplus · Accepted Answer

The Consumer Price Index (CPI) for Year 3 is calculated by taking the cost of the basket in Year 3 ($55), dividing it by the cost of the basket in the base year (Year 1, $50), and then multiplying by 100. This gives a CPI of 110.0 for Year 3.

Suppose a Basket of Goods and Services Has Been Selected