Question

You know that a candy bar cost five cents in 1962. You also know the CPI for 1962 and the CPI for today.
Which of the following would you use to compute the price of the candy bar in today's prices?

a. five cents ((today's CPI - 1962 CPI)/1962 CPI)
b. five cents (today's CPI / 1962 CPI)
c. five cents (1962 CPI / today's CPI)
d. five cents today's CPI - five cents 1962 CPI.

Answer 1

Answer:

b. five cents (today's CPI / 1962 CPI)

Explanation:

CPI stands for Consumer Price Index

The normal formula to compute the CPI is shown below:

Consumer price index = (Product price in current year) ÷  (Product price in base year) × 100

In the given situation, the formula would be

= five cents × (today's CPI ÷  1962 CPI)

Since we have to compute the today CPI so we multiplied the five cents