Suppose a Price Index Is Formed to Measure Changes in the Price

question 62

Multiple Choice

Suppose a price index is formed to measure changes in the price level between 2005 to 2010.To form a Laspeyres price index,one would

• A) compare the cost of the typical basket of goods purchased in 2005 with the cost of the typical basket of goods purchased in 2010.
• B) calculate the increase in the cost of the typical market basket purchased in 2005.
• C) calculate the increase in the cost of the typical market basket purchased in 2010.
• D) take the typical basket of goods purchased in 2007,and compare the costs of that basket in 2005 and 2010.

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