CFA Practice Question

There are 539 practice questions for this study session.

CFA Practice Question

Suppose the CPI basket contains only two goods and services: oranges and haircuts. In the base period, consumers bought 15 oranges at $2 each and 5 haircuts at $10 each. In the current period, consumers buy 15 oranges at $1.75 each and 5 haircuts at $12 each. The CPI for the current period is closest to ______.
A. 107.81
B. 114.58
C. 117.97
Explanation: CPI equals 100 times the cost of the CPI basket at current-period prices divided by the cost of the CPI basket at base-period prices. In this problem, the current period cost is (15 x 1.75 + 5 x 12) = 86.25. The base period cost is (15 x 2 + 5 x 10) = 80. The CPI is (86.25 / 80) x 100 = 107.81.

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