15. Suppose a basket of goods and services has been selected to calculate the CPI and 2016 has been selected as the base year. In 2014, the basket's cost was $50; in 2016, the basket's cost was $52; and in 2018, the basket's cost was $58. The value of the CPI in 2018 was A) 106.0 B) 104.0 C) 111.5 D) 116.0
15. Suppose a basket of goods and services has been selected to calculate the CPI and 2016 has been selected as the base year. In 2014, the basket's cost was $50; in 2016, the basket's cost was $52; and in 2018, the basket's cost was $58. The value of the CPI in 2018 was A) 106.0 B) 104.0 C) 111.5 D) 116.0
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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The initial question is provided in the form of an image. Thanks in advance.
![**Calculating the Consumer Price Index (CPI)**
**Problem Statement:**
Suppose a basket of goods and services has been selected to calculate the CPI and 2016 has been selected as the base year. In 2014, the basket’s cost was $50; in 2016, the basket’s cost was $52; and in 2018, the basket’s cost was $58. The value of the CPI in 2018 was:
A) 106.0
B) 104.0
C) 111.5
D) 116.0
**Solution:**
To determine the value of the Consumer Price Index (CPI) for 2018, we will use the formula for CPI:
\[ \text{CPI} = \left( \frac{\text{Cost of basket in current year}}{\text{Cost of basket in base year}} \right) \times 100 \]
Here, the base year is 2016 and the cost of the basket in 2016 (base year) is $52. The cost of the basket in the current year (2018) is $58.
Substitute these values into the formula:
\[ \text{CPI in 2018} = \left( \frac{58}{52} \right) \times 100 \]
\[ \text{CPI in 2018} \approx 111.5 \]
Therefore, the correct answer is:
C) 111.5](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2Fe3be9b87-a949-46fd-8fcb-61cc2e238448%2Faebd65cc-6365-48be-9db4-abcff9f6dbd3%2Fd24w0q_processed.png&w=3840&q=75)
Transcribed Image Text:**Calculating the Consumer Price Index (CPI)**
**Problem Statement:**
Suppose a basket of goods and services has been selected to calculate the CPI and 2016 has been selected as the base year. In 2014, the basket’s cost was $50; in 2016, the basket’s cost was $52; and in 2018, the basket’s cost was $58. The value of the CPI in 2018 was:
A) 106.0
B) 104.0
C) 111.5
D) 116.0
**Solution:**
To determine the value of the Consumer Price Index (CPI) for 2018, we will use the formula for CPI:
\[ \text{CPI} = \left( \frac{\text{Cost of basket in current year}}{\text{Cost of basket in base year}} \right) \times 100 \]
Here, the base year is 2016 and the cost of the basket in 2016 (base year) is $52. The cost of the basket in the current year (2018) is $58.
Substitute these values into the formula:
\[ \text{CPI in 2018} = \left( \frac{58}{52} \right) \times 100 \]
\[ \text{CPI in 2018} \approx 111.5 \]
Therefore, the correct answer is:
C) 111.5
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