Final answer:
The CPI for today, using 1996 as the base year, is calculated by dividing the cost of the market basket today by its cost in the base year and then multiplying by 100. With the provided figures, the CPI is 121.4, making the correct answer D) 121.4.
Step-by-step explanation:
To calculate the Consumer Price Index (CPI) for today using 1996 as the base year, we need to follow this formula:
CPI = (Cost of Market Basket in Current Year / Cost of Market Basket in Base Year) × 100
We are given that the cost of the market basket in the base year (1996) is $3,500 and the cost today is $4,250. Plugging these values into the formula, we get:
CPI = ($4,250 / $3,500) × 100 = 1.214 × 100 = 121.4
Therefore, the correct answer is D) 121.
The CPI is an essential measurement that reflects the prices of goods and services purchased by the typical urban consumer and is crucial for tracking the changes over time in the cost of living. It measures the prices of things that people buy with their paycheck, which have a direct impact on everyday life.