Suppose a Basket of Goods and Services Has Been Selected

question 84

Multiple Choice

Suppose a basket of goods and services has been selected to calculate the consumer price index (CPI) and 2002 has been chosen as the base year.In 2002,the basket's cost was $76.00; in 2004,the basket's cost was $79.50; and in 2006,the basket's cost was $85.00.The value of the CPI was

• A) 100 in 2002.
• B) 108 in 2004.
• C) 120 in 2006.
• D) at least 118 in 2007.
• E) no more than 90 in 2001.

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Definitions:

Supply Increases

Refers to a situation where the quantity of a good or service that producers are willing and able to sell at a given price level rises, often leading to a decrease in prices if demand remains constant.

Equilibrium Price

The cost at which the amount of a product or service being sought after matches the amount being offered, resulting in a stable market.

Equilibrium Quantity

The quantity of goods or services supplied is exactly equal to the quantity demanded at a particular price.

Shift Demand

A change in the quantity demanded at every price level, resulting in the demand curve moving left or right.