Which of the following statements is true?
A) Base year prices are necessarily higher than current year prices.
B) The CPI in the base year is always 100.
C) If the CPI is 112 in year 1 and 123 in year 2,prices have risen by approximately 9.8 percent between the two years.
D) b and c
E) a,b,and c

Question

Quizplus · Accepted Answer

B is true, as the CPI in the base year is always set to 100.
C is true, as the percent change in prices between year 1 and year 2 is given by [(CPI2-CPI1)/CPI1] x 100, which in this case equals [(123-112)/112] x 100 = 9.8%. 
A is false, as base year prices are not necessarily higher than current year prices. In fact, the CPI measures the change in prices over time, so current year prices can be higher or lower than base year prices depending on the context.

Which of the Following Statements Is True