Question

a consumer price index of 160 in 2016 with a base year of 1982 - 1984 would mean that the cost of the market basket
○ a. rose 60% from the cost of the market basket in the base year.
○ b. equaled $160 in 1983.
○ c. rose 160% from the cost of the market basket in the base year.
○ d. equaled $160 in 2016.

Explanation:

The Consumer Price Index (CPI) measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services. The base - year CPI is set to 100. If the CPI in 2016 is 160 with a base - year of 1982 - 1984 (where CPI = 100), the formula for calculating the percentage change is \(\frac{CPI_{2016}-CPI_{base}}{CPI_{base}}\times100\%\). Substituting the values, we get \(\frac{160 - 100}{100}\times100\%=60\%\).

• Option B: The CPI is an index number (not a dollar amount for a specific year like 1983).
• Option C: The calculation shows a 60% increase, not 160%.
• Option D: The CPI is an index number (not a dollar amount for 2016).

Answer:

A. rose 60% from the cost of the market basket in the base year.