Suppose the Consumer Price Index (CPI) in 1989 is 124.0 and the CPI in 2990
Suppose the Consumer Price Index (CPI) in 1989 is 124.0 and the CPI in 2990 is 130.7 the CPI expressed as a percentage is
- A) 6.7%
- B) 5.4%
- C) 7.6%
- D) 4.5%
Correct Answer: A) 6.7%
Explanation
This question is asking about how to calculate the percentage change in the Consumer Price Index (CPI) between two different years, 1989 and 1990. The CPI is a measure of the average change in prices of goods and services over time.
To find the percentage change in the CPI, we first need to subtract the CPI of 1989 from the CPI of 1990, and then divide the result by the CPI of 1989. We then multiply the quotient by 100 to get the percentage change.
Using the values given in the question, we can calculate the percentage change in the CPI as follows:
(130.7 - 124.0) / 124.0 x 100% = 6.7%
Therefore, the correct answer is Option A: 6.7%.
It's important to note that the CPI is used to measure inflation, which is a sustained increase in the general price level of goods and services in an economy over time. Inflation can have significant economic impacts, such as reducing the purchasing power of money and affecting the cost of living for individuals and households.