Question

Suppose a basket of goods and services has been selected to calculate the consumer price index (CPI) and 2002 has been selected as the base year. In 2002, the basket’s cost was $600; in 2004, the basket’s cost was $650; and in 2006, the basket’s cost was $700. The value of the CPI in 2004 was (rounded to one decimal place)

Answer 1

Answer:

The answer is: The CPI for 2004 is 108.3

Explanation:

The Consumer Price Index (CPI) for 2004 can be calculated using the following formula:

CPI 2004 = (2004 basket cost / base year basket cost) x 100

CPI 2004 = (650 / 600) x 100

CPI 2004 = 108.3

The CPI measures changes in the price level of a basket of goods and services relative to a base year.