For an imaginary economy, the consumer price index was 80 in 2014, 100 in 2015, and 140 in 2016. Which of the following statemen
ts is correct? a. If the basket of goods that is used to calculate the CPI cost $40 in 2014, then that basket of goods cost $60 in 2015. b. If the basket of goods that is used to calculate the CPI cost $25 in 2015, then that basket of goods cost $35 in 2016. c. The overall level of prices increased by 60 percent between 2014 and 2016. d. All of the above are correct.
b. If the basket of goods that is used to calculate the CPI cost $25 in 2015, then that basket of goods cost $35 in 2016.
Explanation:
<u>According to the changes in the consumer price index given</u> by the stament "the consumer price index was 80 in 2014, 100 in 2015, and 140 in 2016", inflation was of 25% () in the period 2014-2015 and of 40% in the period 2015-2016 (). Talking all the period together, inflation in the period 2014-2016 was of 75% ().
This means that on average, prices change in the amount given by inflation each period.
If the basket of goods that was used to calculate the CPI cost $25 in 2015, in 2016 this basket will cost , according to inflation calculated for that period.
Applying the same reasoning, you can show that the others options are not correct.
The book value of an asset is the difference between the historical cost of the asset and the accumulated depreciation on the asset. The accumulated depreciation is the sum of the depreciation over the number of years the asset has been used.
Depreciation = (cost - salvage value)/estimated useful life
So when you divide 13 by 25, you get 0.52. To make that into a percentage, you just multiply it by 100 (move the decimal over 2 places to the left). That gives you 52%