The average annual growth rate for the Consumer Price Index is calculated by finding the
A) standard deviation.
B) geometric mean.
C) arithmetic mean.
D) median.

Question

Quizplus · Accepted Answer

The average annual growth rate for the Consumer Price Index can be calculated using the geometric mean, which takes into account the compounding effect of yearly changes in prices. The geometric mean is calculated by multiplying together all the price index values and then taking the nth root, where n is the number of years. This gives a more accurate representation of the average annual growth rate compared to the arithmetic mean, which does not take into account the compounding effect.

The Average Annual Growth Rate for the Consumer Price Index