multiple choice 1 point suppose a basket of goods and services has been selected to calculate the cpi and…

multiple choice 1 point suppose a basket of goods and services has been selected to calculate the cpi and 2012 has been selected as the base year. in 2012, the baskets cost was $77. in 2013, the baskets cost was $82; and in 2014, the baskets cost was $90. the value of the cpi in 2014 was _. 109.8 and the inflation rate was 9.8%. 109.8 and the inflation rate was 16.9%. 116.9 and the inflation rate was 9.8%. 116.9 and the inflation rate was 16.9%.

multiple choice 1 point suppose a basket of goods and services has been selected to calculate the cpi and 2012 has been selected as the base year. in 2012, the baskets cost was $77. in 2013, the baskets cost was $82; and in 2014, the baskets cost was $90. the value of the cpi in 2014 was _. 109.8 and the inflation rate was 9.8%. 109.8 and the inflation rate was 16.9%. 116.9 and the inflation rate was 9.8%. 116.9 and the inflation rate was 16.9%.

Answer

Explanation:

Step1: Recall CPI formula

The formula for the Consumer - Price Index (CPI) is $CPI=\frac{\text{Cost of basket in current year}}{\text{Cost of basket in base year}}\times100$. Here, the base - year is 2012 with a basket cost of $C_{2012} = 77$, and the current year is 2014 with a basket cost of $C_{2014}=90$.

Step2: Calculate CPI in 2014

Substitute the values into the formula: $CPI_{2014}=\frac{C_{2014}}{C_{2012}}\times100=\frac{90}{77}\times100\approx116.9$. The inflation rate formula is $\text{Inflation rate}=\frac{CPI_{t}-CPI_{t - 1}}{CPI_{t - 1}}\times100$. Since we assume $CPI_{2012} = 100$ (base - year), and $CPI_{2014}\approx116.9$. If we consider the two - year period from 2012 to 2014, we can calculate the inflation rate. Let's assume we want to find the average annual inflation rate. First, find the total inflation rate from 2012 to 2014: $\text{Total inflation rate}=\frac{116.9 - 100}{100}\times100 = 16.9%$.

Answer:

116.9 and the inflation rate was 16.9%