Which of the following statements about price indexes is FALSE?
A) The price index number for the base year is 100.0.
B) The price index number for each year is expressed as a percentage of the price in the base year.
C) If items that cost $200 in the base year cost $300 this year, the price index number for this year is 300.0.
D) An index number of 120.0 in a particular year means that prices are 20.0 percent higher in that year than in the base year.

Question

Quizplus · Accepted Answer

The correct calculation for the price index in this scenario would be $(\frac{300}{200}) \times 100 = 150.0$, not 300.0. This means that the price index number for this year would indicate a 50% increase from the base year, not a 200% increase to 300.0.

Which of the Following Statements About Price Indexes Is FALSE