Arrange the steps for calculating the Consumer Price Index in the correct order:
(A) Express the current-year cost as a percentage of the base-year cost.
(B) Choose a given basket of commodities bought by the representative consumer.
(C) Calculate the cost of the same basket in the current year.
(D) Calculate the cost of the basket in the base year.
Choose the correct answer from the options given below:
Answer & explanation
Correct answer: option 1
The correct answer is Option (1) → (B), (D), (C), (A)
CPI compares the cost of one fixed basket in two years.
(B) Choose the basket — the goods bought by the representative consumer.
(D) Base-year cost — the cost of the basket at base-year prices.
(C) Current-year cost — the cost of the same basket at current prices.
(A) Percentage — current-year cost as a percentage of base-year cost.
NCERT (2026-27): “2.4 Nominal and Real GDP … There is another way to measure change of prices in an economy which is known as the Consumer Price Index (CPI). This is the index of prices of a given basket of commodities which are bought by the representative consumer. CPI is generally expressed in percentage terms. We have two years under consideration – one is the base year, the other is the current year. We calculate the cost of purchase of a given basket of commodities in the base year. We also calculate the cost of purchase of the same basket in the current year. Then we express the latter as a percentage of the former. …” |