Canadians spend about 27 percent of their total expenditures on housing. If the price of housing increases by 10 percent, by how much does the CPI increase?

Question

Quizplus · Accepted Answer

Since Canadians spend 27 percent of their total expenditures on housing, the weight of housing in the CPI basket is 0.27. If the price of housing increases by 10 percent, the contribution of housing to the CPI would be 0.27 times 10 percent, which is 0.027. Therefore, the CPI would increase by 2.7 percent (0.027 times 100).

Canadians Spend About 27 Percent of Their Total Expenditures on Housing