If food makes up about 15% of total expenditure of the country, and if the food prices rise by 10%, while other components of th
e price index remain constant, how much will the price index rise?
a. 1%
b. 25%
c. 1.5%
d. 15%
1 answer:
Answer:
c. 1.5%
Explanation:
Food as total Expenditure of Country = 15%
Food's Price rise = 10%
while other components of the price index remain constant price index rise will be calculated as follows:
Price index rise = 15% x 10%
Price index rise = 0.15 x 0.1
Price index rise = 0.015
Price index rise =1.5%
So the correct option is c. 1.5%
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