Table 9-11

-Refer to Table 9-11.Suppose an economy has only three goods and the typical family purchases the amounts given in the table above.If 2005 is the base year,then what is the CPI for 2013?
A)40.08
B)100
C)180
D)208

Question

Table 9-11
 
-Refer to Table 9-11.Suppose an economy has only three goods and the typical family purchases the amounts given in the table above.If 2005 is the base year,then what is the CPI for 2013?
A)40.08 
B)100 
C)180 
D)208

Quizplus · Accepted Answer

To calculate the CPI for 2013, we first need to calculate the total cost of the basket of goods for both the base year (2005) and the current year (2013).

For 2005: 
Total cost = (10 x $2.00) + (15 x $1.00) + (5 x $4.00) = $40

For 2013: 
Total cost = (10 x $5.00) + (15 x $2.00) + (5 x $10.00) = $180

Next, we divide the total cost for 2013 by the total cost for 2005 and multiply by 100 to get the CPI:

CPI = ($180 / $40) x 100 = 450

Therefore, the CPI for 2013 is 450. However, since we are using 2005 as the base year, we need to adjust the CPI to be equal to 100 in the base year. To do this, we divide the CPI for 2013 by the CPI for the base year (which is always 100) and multiply by 100:

Adjusted CPI = (450 / 100) x 100 = 450

So the CPI adjusted for the base year of 2005 is 450, which means prices have increased by 350% since 2005.

The best choice is D, 208, because it is the closest to the adjusted CPI of 450.

Table 9-11 -Refer to Table 9-11.Suppose an Economy Has Only Three Goods