Question

"If the cost of a market basket of goods increases from $100 in year 1 to $108 in year 2, what does the consumer price index in year 2 equal if year 1 is the base year?"

Answer 1

Answer:

108

Explanation:

Given that,

Cost of a market basket of goods in year 1 = $100

Cost of a market basket of goods in year 2 = $108

Here, we assume that year 1 is the base year.

Consumer price index in year 2:

= (Cost of a market basket of goods in year 2 ÷ Cost of a market basket of goods in base year) × 100

= ($108 ÷ $100) × 100

= 1.08 × 100

= 108