Suppose a Basket of Goods and Services Has Been Selected

question 92

Multiple Choice

Suppose a basket of goods and services has been selected to calculate the consumer price index.In 2005,the basket of goods cost $108.00;in 2006,it cost $135.00;and in 2007,it cost $168.75.Which of the following statements is correct?

• A)Using 2005 as the base year,the economy's inflation rate was higher in 2007 than it was in 2006.
• B)If 2007 is the base year,then the CPI is 33.75 in 2006.
• C)If the CPI is 156.25 in 2007,then 2005 is the base year.
• D)Using 2005 as the base year,the economy's inflation rate for 2006 was 27 percent.

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Definitions:

Amortization

The gradual reduction of the book value of an intangible asset or the paying down of a debt over a fixed period of time.

Consolidation Worksheet

An accounting tool used to combine the financial statements of a parent company and its subsidiaries, enabling the preparation of consolidated financial statements.

Initial Value Method

A method of investment accounting where the investment is initially recorded at cost, without subsequent adjustments for changes in fair value.

Equity Income

Income earned from investments in shares of companies, often received as dividends, indicating profit participation in these companies.