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:

Exports

Goods and services produced in one country and sold to buyers in another, contributing to a country's GDP.

Purchasing-Power Parity

An economic theory that compares different countries' currencies through a "basket of goods" approach to assess their purchasing power equivalence.

Inconsistency

Lack of coherence or uniformity in actions, statements, or conditions.

Purchasing-Power Parity

An economic theory that compares different countries' currencies through a "basket of goods" approach to evaluate the relative purchasing power of the countries.