- CFA Exams
- CFA Level I Exam
- Study Session 4. Economics (1)
- Reading 14. Aggregate Output, Prices, and Economic Growth
- Subject 1. Gross Domestic Product

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**CFA Practice Question**

In a simple economy containing only two goods - apples and shirts - the prices and quantities in the base period and the current period are:

Apples | 25 | 1.00

Shirts | 5 | 20.00

Apples | 25 | 1.25

Shirts | 5 | 20.50

Base Period | Quantity | Price

Apples | 25 | 1.00

Shirts | 5 | 20.00

Current Period | Quantity | Price

Apples | 25 | 1.25

Shirts | 5 | 20.50

Assuming the base period consumer price index (CPI) = 100, the CPI for the current period is closest to ______.

A. 105.60

B. 107.00

C. 109.75

**Explanation:**The cost of the CPI basket at base period prices is: (25 x $1.00) + (5 x $20.00) = $125. The cost of the CPI basket at current period prices is: (25 x $1.25) + (5 x $20.50) = $133.75. The CPI for the period is ($133.75 / $125) x 100 = 107.

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