5
QuizMultiple Choice

GDP and Changes in the Price Level

Question 5 • VT-GA-EOC-Personal Finance & Economics A ULHS

To construct a price index, all of the following are needed EXCEPT

Answer
A
a base year.
B
the current inflation rate.
C
a market basket.
D
the price of market basket items.

Explanation

A price index compares the cost of a market basket in a particular year with its cost in a base year. You need the base year, the market basket, and the prices of the basket’s items to calculate it. The current inflation rate is not needed to construct the index; it can be calculated from changes in the index over time.

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