Question

CPI​ = ______.

A.(Cost of CPI basket at​ current-period prices divided by Cost of CPI basket at​ base-period ​prices) times 100

B.[(Cost of CPI basket at​ base-period pricesminusCost of CPI basket at​ current-period ​prices) divided by Cost of CPI basket at​ current-period ​prices] times 100

C.​(Cost of CPI basket at​ base-period prices divided by Cost of CPI basket at​ current-period ​prices) times 100

D.[(Cost of CPI basket at​ current-period pricesminusCost of CPI basket at​ base-period ​prices) divided by Cost of CPI basket at​ current-period ​prices] times 100

Answer 1

The correct formula for calculating the Consumer Price Index (CPI) is the cost of the CPI basket at current-period prices divided by the cost of the CPI basket at base-period prices, then multiplied by 100, which corresponds to option A.

Step-by-step explanation:

The correct definition of the Consumer Price Index (CPI) is: A measure of inflation that reflects the change in cost for a fixed basket of goods and services over time. The CPI is calculated by taking the cost of a fixed basket of goods and services at current-period prices, dividing it by the cost of that same basket at base-period prices, and then multiplying by 100. Therefore, the correct formula for the CPI would be: (Cost of CPI basket at current-period prices divided by Cost of CPI basket at base-period prices) times 100, which is represented as option A in your question.