ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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100
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200
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115
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130
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Detailed explanation-1: -If the cost of a market basket is $200 in year 1 and $230 in year 2, the price index for year 2 using year 1 as the base is: 115.
Detailed explanation-2: -The base year is given an index of 100. To compare, each year is given an index # as well. To get the cost of the basket, add up the prices of all items in the basket in a given year. The quantity in the basket must be the same as the base year.
Detailed explanation-3: -If the price index was 90 in year 1, 100 in year 2, and 95 in year 3, then the economy experienced: 11.1 percent inflation between years 1 and 2, and 5 percent deflation between years 2 and 3.
Detailed explanation-4: -Answer and Explanation: The statement, “In a particular economy, the price index was 120 in 2012 and 130 in 2013. This means the economy experienced a rising price level between 2012 and 2013, ” is True.
Detailed explanation-5: -Question: The steps involved in calculating the consumer price index and the inflation rate, in order, are as follows: a. Choose a base year, update the basket, find the prices, estimate the basket’s cost, compute the index, and compute the inflation rate.