A good cost $400 in the base year, and in a later year the price index number for the good was 125.0. In that later year the good cost:
A) $125.
B) $425.
C) $500.
D) $525.

Question

Quizplus · Accepted Answer

The price index number represents the percentage change in price from the base year to the later year. A price index of 125.0 means the price has increased by 25% from the base year. Therefore, the new price is 125% of the original $400 price, which is $400 * 1.25 = $500.

A Good Cost $400 in the Base Year, and in a Later