Suppose total expenditures for a typical household in 2002 were $5,500 per month,while the cost of purchasing exactly the same items in 2012 was $6,875.If 2002 is the base year,the consumer price index (CPI)for the year 2012 equals
A) 80.
B) 100.
C) 120.
D) 125.
E) 130.

Question

Quizplus · Accepted Answer

To calculate the CPI, we use the following formula:

CPI = (cost of market basket in current year / cost of market basket in base year) x 100

From the given information, we know that the cost of the same items in 2012 is $6,875, and the cost of the items in 2002 is the base year and is therefore equal to $5,500.

So, CPI = (6,875 / 5,500) x 100

CPI = 125

Therefore, the answer is D) 125.

Suppose Total Expenditures for a Typical Household in 2002 Were