If the inflation rate, as measured by the CPI, over the past year was 4%, a basket of goods and services that cost _____ a year ago would be equivalent to _______ at the current price level.
A) $100,000, $140,000
B) $50,000, $50,400
C) $50,000, $52,000
D) $100,000, $100,400

Question

Quizplus · Accepted Answer

A 4% inflation rate means the cost of goods and services has increased by 4%. Therefore, a basket that cost $50,000 a year ago would now cost $52,000 ($50,000 + 4% of $50,000).

If the Inflation Rate, as Measured by the CPI, Over