A consumer price index of 160 in 1996 with a base year of 1982-1984 would mean that the cost of the market basket
A)equaled $160 in 1996.
B)equaled $160 in 1983.
C)rose 160% from the cost of the market basket in the base year.
D)rose 60% from the cost of the market basket in the base year.

Question

Quizplus · Accepted Answer

A consumer price index (CPI) of 160 implies that the cost of the market basket of goods and services in 1996 was 60% higher than the cost of the same market basket in the base year of 1982-1984. This means that the cost of the market basket in the base year was (160/1.6) = $100. Therefore, option D correctly states that the cost of the market basket rose 60% from the cost of the market basket in the base year. Option A is incorrect as the CPI of 160 does not mean that the cost of the market basket was $160 in 1996. Option B is incorrect as the base year is a range (1982-1984) and not just 1983. Option C is incorrect as a CPI of 160 does not imply a rise of 160% from the cost of the market basket in the base year.

A Consumer Price Index of 160 in 1996 with a Base