Suppose the base year for a Laspeyres index is 2001.The value of the index is 1.3 in 2004 and 1.6 in 2006.By how much did the cost of the bundle increase between 2004 and 2006?
A).3%
B) 23%
C).23%
D) 60%

Question

Quizplus · Accepted Answer

The Laspeyres index measures the cost of a fixed basket of goods over time. The index increased from 1.3 in 2004 to 1.6 in 2006, which is an increase of (1.6 - 1.3) / 1.3 = 0.3 / 1.3 = 0.2307, or approximately 23%.

Suppose the Base Year for a Laspeyres Index Is 2001