Question

Suppose a basket of goods and services has been selected to calculate the consumer price index (CPI) and 2002 has been chosen as the base year. In 2002, the basket’s cost was $76.00; in 2004, the basket’s cost was $79.50; and in 2006, the basket’s cost was $85.00. The value of the CPI (rounded up) was: Group of answer choices no more than 90 in 2001. at least 118 in 2007. 120 in 2006. 90 in 2002. 105 in 2004.

Answer 1

Answer:

105 in 2004.

Explanation:

year                      basket price                  CPI

2002                       $76.00                        100

2004                       $79.50                        105

2006                       $85.00                        112

2004 CPI = $79.50 / $76 = 1.05 x 100 = 105

2006 CPI = $85 / $76 = 1.12 x 100 = 112

The consumer price index (CPI) measures the weighted average of the prices of a basket of goods and services in 21 urban centers in the US (each urban center includes more than 1 city, some include several). The information is gathered, processed and presented by the US Bureau of Labor Statistics (BLS). The CPI is used an an economic indicator (used to calculate inflation rate), or deflator, and to adjust the value of the US dollar (e.g. adjusting social security payments).