Question

If you hear that the 2011 consumer price index (CPI) is currently 210, you can determine that the same market basket costs

A. 10% more than it did in 2010
B. 10% more than it did in the base year
C. 210% more than it did in the base year
D. 210% more than it did in 2010
E. 110% more than it did in the base year

Answer 1

Option E.

Step-by-step explanation:

We know that, the formula to consumer price index(CPI) is:

`CPI=\frac{\text{cost of market basket in current period}}{\text{cost of market basket in base period}}* 100`

It means, CPI represents the percent of cost of market basket in current period with respect to cost of market basket in base period.

CPI is 210 in 2011. It means, cost of market basket in 2011 is 210% of the cost of market basket in base year.

Cost of market basket in base year is always 100%.

210% - 100% = 110%.

So, the same market basket costs 110% more than it did in the base year.

Therefore, the correct option is E.