question 2 of 5 if the consumer price index rises from 101 to 104, which of the following statements is…

question 2 of 5 if the consumer price index rises from 101 to 104, which of the following statements is true? the average level of prices for a fixed basket of goods and services falls by 2.97%. the prices for all goods in the economy fell by 2.97%. household income rises by 2.97%. the prices for goods in the economy rose by 2.97%. household income decreases by 2.97%.

question 2 of 5 if the consumer price index rises from 101 to 104, which of the following statements is true? the average level of prices for a fixed basket of goods and services falls by 2.97%. the prices for all goods in the economy fell by 2.97%. household income rises by 2.97%. the prices for goods in the economy rose by 2.97%. household income decreases by 2.97%.

Answer

Explanation:

Step1: Recall CPI formula

The formula for calculating the percentage - change in CPI is $\text{Percentage change}=\frac{CPI_{new}-CPI_{old}}{CPI_{old}}\times100%$.

Step2: Substitute values

Given $CPI_{old} = 101$ and $CPI_{new}=104$. Substitute into the formula: $\frac{104 - 101}{101}\times100%=\frac{3}{101}\times100%\approx 2.97%$. The CPI measures the average level of prices for a fixed basket of goods and services. A rise in CPI means the average level of prices for the fixed basket of goods and services has increased.

Answer:

The prices for goods in the economy rose by 2.97%.