Question

A consumer price index of 160 in 1996 with a base year of 1982minus−1984 would mean that the cost of the market basket A. equaled​ $160 in 1996. B. rose​ 60% from the cost of the market basket in the base year. C. equaled​ $160 in 1983. D. rose​ 160% from the cost of the market basket in the base year.

Answer 1

Answer:

The answer to the question is option "A," which states that the cost of the market basket equaled​ $160 in 1996

Explanation:

Currently, the reference base for most CPI indexes is 1982- 84=100 but some indexes have other references bases. The reference base years refer to the period in which the index is set to 100.0. In addition, expenditure weights are updated every two years to keep the CPI current with changing consumer preferences.

Answer 2

Answer:

B) rose​ 60% from the cost of the market basket in the base year.

Explanation:

The consumer price index measures the weighted price of basket of goods . It is useful for calculating inflation and comparing how the purchasing value of the US dollar has decreased in time. Basically what this shows us is that $10 in 1982 would purchase the same amount of goods as $16 in 1996.

The price of the CPI basket is not $100, the changes in the CPI basket are calculated by dividing the cost of the CPI basket from 1996 by the cost of the CPI basket of the base year. Then it is multiplied by 100 for practical reasons, it is much like a percent. E.g. CPI 180 means that the cost of the basket of goods increased by 80% compared to a base year.