If the price index in year A is 130, this means that:
A) Prices in year A are on average 130 percent higher than in the base year
B) Prices in year A are on average13 times that in the base year
C) Prices in year A are on average 30 percent higher than in the base year
D) Nominal GDP is 130 percent higher than real GDP in year A

Question

Quizplus · Accepted Answer

A price index of 130 means that prices have increased by 30 percent compared to the base year. It does not mean that prices are 130 percent higher or 13 times higher. Also, the price index has no direct relationship to nominal or real GDP.

If the Price Index in Year a Is 130, This