In an economy, the total expenditures for a market basket of goods in year 1 (the base year) was $5,000 billion. In year 2, the

Question

3 years ago

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In an economy, the total expenditures for a market basket of goods in year 1 (the base year) was $5,000 billion. In year 2, the

total expenditure for the same market basket of goods was $5,500 billion. What was the Consumer Price Index for the economy in year 2?
A. 100
B. 115
C. 110
D. 120

Business

1 answer:

julia-pushkina [17] · Answer 1 · 2021-12-12T12:59:06+03:00

Answer:

The correct answer is option (C).

Explanation:

According to the scenario, the given data are as follows:

Base year basket price = $5,000 billion

Year 2 basket price = $5,500 billion

So, we can calculate the consumer price index by using following formula:

Consumer price index = (Year 2 basket price ÷ Base year basket price ) × 100

By putting the value, we get

Consumer price index = ( $5,500 ÷ $5,000 ) × 100

= 1.1 × 100

= $110 billion