If we read that the CPI had value of 120 in 2005,we would know that
A) the typical market basket in 2005 was 20 percent more expensive than in the previous year
B) the typical market basket in 2005 was 120 percent more expensive than in the base year
C) the typical market basket in the base year was 120 percent more expensive than in 2005
D) the typical market basket in 2005 was 20 percent more expensive than in the base year
E) the cost of a loaf of bread is higher now than it has been during the past ten years

Question

Quizplus · Accepted Answer

A CPI of 120 in 2005 means that prices were 20% higher in 2005 than in the base year. Therefore, choice D is correct. Choice A is incorrect because it suggests a comparison to the previous year rather than the base year. Choice B is incorrect because it suggests a 120% increase from the base year, which is not accurate. Choice C is incorrect for the same reason as choice B. Choice E is not relevant to the information provided.

If We Read That the CPI Had Value of 120