If the cost of medical care increases by 40 percent, then, other things the same, the CPI is likely to increase by about

Question

Quizplus · Accepted Answer

Medical care has a weight of approximately 8.4 percent in the CPI basket of goods and services. A 40 percent increase in the cost of medical care would result in a 3.36 percentage point increase in the overall CPI (8.4 percent x 0.4), assuming no other changes. Therefore, the CPI is likely to increase by about 2.8 percent (3.36 percent ÷ 1.2 is approximately 2.8 percent).

If the Cost of Medical Care Increases by 40 Percent