15 Suppose a basket of goods and services has been selected

15. Suppose a basket of goods and services has been selected to calculate the CPl and 2014 has been selected as the base year. In 2013, the basket\'s cost was $80 in 2014, the basket\'s cost was $86 and in 2015, the basket\'s cost was $90. The value of the CPI in 2015 was 112.5 and the inflation rate was 12.5%. 112.5 and the inflation rate was 4.6%. 104.6 and the inflation rate was 4.6%. 104.6 and the inflation rate was 12.5%. (a) (b) (c) (d)

Solution

• CPI in 2015 = (cost of market basket in 2015 / cost of market basket in base year, 2014) * 100 = (90/86)*100 = 104.6

• Inflation in 2015 = [(CPI in 2015 - CPI in 2014 )/CPI in 2014] *100

As, 2014 is the base year therefore CPI in 2014 = 100

Inflation In 2015 = [(104.6 - 100)/100]*100 = 4.6?

Answer- option C