If the Consumer Price Index (CPI)is 160 One Year and 175

question 127

Multiple Choice

If the consumer price index (CPI) is 160 one year and 175 the next,the annual rate of inflation as measured by the CPI is approximately _____.

• A)4.5 percent
• B)8.6 percent
• C)9.4 percent
• D)15 percent
• E)175 percent

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Definitions:

GDP

Gross Domestic Product refers to the sum total of all monetary values of final goods and services produced within the geographical confines of a country during a given time frame.

Income Effect

The change in an individual’s or economy’s income and how that change will affect the quantity demanded of a good or service.

Substitution Effect

The change in consumption patterns due to a change in the relative prices of goods, leading consumers to replace more expensive items with less expensive ones.

Interest-Rate Increase

A rise in the cost of borrowing money, reflected in a higher percentage charged on loans and credits.