If the CPI changes from 125 to 120 between 2010 and 2011, how did prices change between 2010 and 2011?
A)Prices increased by 5%.
B)Prices decreased by 5%.
C)Prices increased by 25%.
D)Prices decreased by 4%.
E)Prices increased by 125%.

Question

Quizplus · Accepted Answer

The CPI measures the cost of a fixed basket of goods and services over time, so a decrease in the CPI means that the cost of the basket decreased. Therefore, prices decreased between 2010 and 2011. To calculate the percentage change, we use the formula (New Index - Old Index) / Old Index x 100, which gives us (120 - 125) / 125 x 100 = -4%. So, prices decreased by 4%.

If the CPI Changes from 125 to 120 Between 2010