Use the following to answer questions:
-(Table: Peanut Butter and Jelly)Use Table: Peanut Butter and Jelly.Suppose a market basket consists of 20 jars of peanut butter and 10 jars of jelly.If 2012 is the base year,what is the value of the price index in 2012?
A) 0
B) 90
C) 100
D) 111.25

Question

Use the following to answer questions: 
-(Table: Peanut Butter and Jelly)Use Table: Peanut Butter and Jelly.Suppose a market basket consists of 20 jars of peanut butter and 10 jars of jelly.If 2012 is the base year,what is the value of the price index in 2012?
A) 0 
B) 90 
C) 100 
D) 111.25

Quizplus · Accepted Answer

To find the price index in a given year, we need to calculate the cost of the market basket in that year and divide it by the cost of the market basket in the base year, then multiply by 100. Since we only have information for the base year in this table, we assume that the cost of the market basket in the base year is $45 ($3 per jar of peanut butter x 20 jars + $1.50 per jar of jelly x 10 jars). Therefore, the price index in 2012 (the base year) is:
($45 / $45) x 100 = 100. The correct answer is C.

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