Asked by taylor christy on Apr 29, 2024
Verified
Suppose that on average each dollar in 1988 would buy what could have been purchased for 25 cents in 1967 (which you assume is the base year for the CPI) .What is the CPI in 1988?
A) 100
B) 200
C) 400
D) 500
E) ¼
Consumer Price Index
An indicator that measures the average change over time in the prices paid by consumers for a basket of goods and services.
Base Year
A specific year against which economic growth or other economic indicators are measured, serving as a comparison for subsequent years' data.
- Assess variations in price levels and recognize their influence on economic conditions.
Verified Answer
ZK
Zybrea KnightMay 06, 2024
Final Answer :
C
Explanation :
The CPI in 1988 can be calculated as (average price level in 1988/average price level in 1967) * 100. Since each dollar in 1988 is equivalent to 4 dollars in 1967 (since each dollar buys what could have been purchased for 25 cents in 1967), the average price level in 1988 is 4 times the average price level in 1967. Therefore, the CPI in 1988 is (4*100)*100 = 400.
Learning Objectives
- Assess variations in price levels and recognize their influence on economic conditions.