05) = 106$$.","correct":false,"explanation":"This undercounts the weighted total through an addition error. The separate contributions are 66 and 42, which sum to a CPI of 108 rather than 106."}]},{"id":"9c1066a8-7f31-40aa-9792-419d41c39ff6","cardType":"basic","front":"Calculate the inflation rate when the CPI rises from 100 to 108.","back":"$$$\\dfrac{108 - 100}{100} \\times 100 = 8\\%$$","points":2,"mcqOptions":[{"text":"$$$\\dfrac{108 - 100}{100} \\times 100 = 8\\%$$","correct":true,"explanation":"Inflation is the percentage change in CPI: the 8-point increase is divided by the initial index of 100 and multiplied by 100, giving 8%."},{"text":"$$$\\dfrac{108 - 100}{108} \\times 100 = 7.4\\%$$","correct":false,"explanation":"Dividing by the final CPI is a common percentage-change error. The increase must be divided by the initial CPI of 100, producing an inflation rate of 8%."},{"text":"$$$\\dfrac{108}{100} \\times 100 = 108\\%$$","correct":false,"explanation":"This calculates the new index as a percentage of the old index rather than the percentage increase. Subtracting 100 first gives an inflation rate of 8%."},{"text":"$$$\\dfrac{108 - 100}{100} = 0.08\\%$$","correct":false,"explanation":"The decimal change has been labelled as a percentage without multiplying by 100. A decimal change of 0.08 corresponds to an inflation rate of 8%."}]},{"id":"1dde0ffd-0d1c-4675-b7c4-0b7307864b26","cardType":"cloze","front":"The CPI is a [ ] tracking the average price of a fixed basket bought by a typical household.","back":"The CPI is a weighted index tracking the average price of a fixed basket bought by a typical household.","points":null,"mcqOptions":[{"text":"weighted index","correct":true,"explanation":"CPI is weighted because categories receive importance according to their share of typical household spending, and it is an index because prices are compared with a base period."},{"text":"simple average","correct":false,"explanation":"A simple average would give every item equal importance, ignoring household expenditure shares. CPI is a weighted index, so heavily purchased categories exert more influence on its value."},{"text":"price ceiling","correct":false,"explanation":"A price ceiling is a legal maximum price imposed by a government, not a measure of price changes. CPI is a weighted index tracking a representative basket."},{"text":"nominal value","correct":false,"explanation":"A nominal value is expressed in current monetary terms without adjustment for inflation. CPI is instead a weighted index used to track changes in the basket’s average price."}]},{"id":"d556efff-5689-4074-be59-cd04231400c7","cardType":"cloze","front":"The base year's index is set to $\\text{[...]}$.","back":"The base year's index is set to $\\boxed{100}$.","points":null,"mcqOptions":[{"text":"$$100$","correct":true,"explanation":"Setting the base year equal to 100 makes later index values easy to interpret. For example, an index of 105 represents prices 5% above the base-year level."},{"text":"$$0$","correct":false,"explanation":"Using zero would prevent meaningful percentage comparisons because percentage changes cannot use zero as a base denominator. The base year’s CPI index is conventionally set to 100."},{"text":"$$1$","correct":false,"explanation":"Although ratios can use 1 as a reference, CPI convention expresses the base as an index of 100. This makes subsequent percentage differences directly readable."},{"text":"$$1000$","correct":false,"explanation":"A base of 1000 could technically scale an index, but it is not the standard CPI convention and would obscure direct interpretation. The base-year index is set to 100."}]},{"id":"5d86d6a0-8e38-4862-9446-a6094a302d4e","cardType":"cloze","front":"The inflation rate is calculated as the [ ] between two periods.","back":"The inflation rate is calculated as the percentage change in the CPI

4.6.2 measurement of changes in the price level Flashcards

4.6.2 measurement of changes in the price level Flashcards