-Consider Table 2.3.Using the Laspeyres index,inflation between 2004 and 2005 was about:
A)0 percent.
B)5 percent.
C)1 percent.
D)6 percent.
E)Not enough information is given.

Question

-Consider Table 2.3.Using the Laspeyres index,inflation between 2004 and 2005 was about:
A)0 percent. 
B)5 percent. 
C)1 percent. 
D)6 percent. 
E)Not enough information is given.

Quizplus · Accepted Answer

The Laspeyres index is a measure of inflation that uses the prices of a fixed basket of goods and services to calculate the change in the cost of living. In this case, the Laspeyres index between 2004 and 2005 is calculated as follows:(Cost of basket in 2005 / Cost of basket in 2004) x 100= (105 / 100) x 100= 105This means that the cost of the basket of goods and services increased by 5% between 2004 and 2005.