If the Purchasing Power of the Pound index has a value of 75, which of the following statements IS true?
A) Items that cost 75p in the base period cost £1 today
B) Items that cost £1 in the base period cost 75p today
C) Prices today are 75% of those in the base period
D) Prices today are 75% higher than in the base period

Question

Quizplus · Accepted Answer

When the Purchasing Power of the Pound index is 75, it means that what could be bought for £1 in the base period now costs more, specifically £1.33 (since £1 divided by 0.75 equals £1.33). Therefore, the correct interpretation is that items costing 75p in the base period cost £1 today, indicating a decrease in purchasing power.

If the Purchasing Power of the Pound Index Has a Value