Formula for the Inflation Rate from a Price Index

GDP Deflator

An economy's fixed consumer basket consists of 10 books and 20 coffees. In the base year, the price of a book was $10 and the price of a coffee was $5. In the current year, the price of a book is $12 and the price of a coffee is $6. Using the base year as the reference, what is the value of the price index in the current year?

Interpreting a Price Index

If the total cost of a fixed basket of goods has increased by exactly 25% since the designated base year, the price index for the current year will be 125.

Calculating Basket Cost from a Price Index

An economy tracks the price of a fixed basket of goods, which consists of 5 pizzas and 10 sodas. The prices for these goods over three years are shown in the table below.

By selecting 2022 as the base year, what is the calculated price index for the year 2023, rounded to one decimal place?

Analyzing a Price Index Calculation Method

A country's price index for the current year is calculated to be 95, using the previous year as the base period. Which of the following statements accurately describes the relationship between the cost of the fixed basket of goods in the two years?

Analyzing an Incorrect Price Index Calculation

An economy's fixed basket of goods consists of 20 apples and 10 bananas. The table below shows the price of these goods over three years. Using Year 1 as the base year, match each year to its correct price index.

An economy's fixed basket of goods consists of 5 pizzas and 10 sodas. In the base year, the price of a pizza was $10 and the price of a soda was $2. In the current year, the price of a soda has risen to $2.80, and the overall price index is calculated to be 140. Based on this information, what must be the price of a pizza in the current year? (Enter a numerical value only, without the dollar sign)