Asked by Regan Waite on Jun 28, 2024
Verified
The price index for a market basket of goods can be found by
A) dividing the value of the market basket by the rate of inflation.
B) multiplying the base-year cost of the basket by the current-year cost of the basket divided by 100.
C) dividing the current-year value of the market basket by the base-year value of the basket and multiplying the result by 100.
D) multiplying the value of the market basket by the rate of inflation.
Price Index
An index number that shows how the weighted average price of a market basket of goods changes through time.
Market Basket
A selected set of goods and services used to track changes in prices and inflation over time.
Rate of Inflation
The percentage increase in the general price level of goods and services in an economy over a period of time, typically measured annually.
- Determine fluctuations in price levels and comprehend their effect on the economy.
Verified Answer
ZK
Zybrea KnightJul 05, 2024
Final Answer :
C
Explanation :
The price index for a market basket of goods is calculated by dividing the current-year value of the market basket by the base-year value of the basket and multiplying the result by 100. This is because the price index measures the percentage change in the cost of the basket over time, relative to a base year. Option A and D are incorrect as they do not take into account the base-year value of the basket. Option B is incorrect as it divides by 100 for unknown reasons.
Learning Objectives
- Determine fluctuations in price levels and comprehend their effect on the economy.