The CPI for "educational books and supplies" in June of 2006 was 386.7 (1982-1984 = 100). Interpret this index.
A)There was no significant increase in the price of "educational books and supplies."
B)The price of "educational books and supplies" increased 386.7 times.
C)If the average price of a textbook in 1982-1984 was $25.00,the CPI for "educational books and supplies" would predict that the price of the textbook in June 2006 would be $71.68.
D)If the average price of a textbook in 1982-1984 was $25.00,the CPI for "educational books and supplies" would predict that the price of the textbook in June 2006 would be $96.68.

Question

Quizplus · Accepted Answer

The CPI is a measure of inflation that compares the current prices of goods and services to the average prices of those same goods and services in a base year. In this case, the base year is 1982-1984, and the CPI for "educational books and supplies" in June 2006 was 386.7. This means that the average price of "educational books and supplies" in June 2006 was 3.867 times higher than the average price in 1982-1984. If the average price of a textbook in 1982-1984 was $25.00, then the CPI for "educational books and supplies" predicts that the price of the textbook in June 2006 would be $71.68 (25 x 3.867 = 96.675, rounded to $71.68). Therefore, the best choice is C.

The CPI for "Educational Books and Supplies" in June of 2006