The price index is calculated as

  • A \(\frac{\text{weighted price}}{\text{current price}} x \frac{100}{1}\)
  • B \(\frac{\text{base year price}}{\text{current price}} x \frac{100}{1}\)
  • C \(\frac{\text{current price}}{\text{weighted price}} x \frac{100}{1}\)
  • D \(\frac{\text{current price}}{\text{base year price}} x \frac{100}{1}\)
jamb 2006economics

The correct answer is D. \(\frac{\text{current price}}{\text{base year price}} x \frac{100}{1}\)

The price index, also known as the consumer price index (CPI) or the inflation rate, is calculated by dividing the current price level by the base year price level and then multiplying by 100 to express it as a percentage.

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