If the current year CPI is 140, then the price level has increased 40 percent since the base year.

Question

BlackTom AI · Accepted Answer

Consider what the CPI number represents in relation to the base year.
Option 1: True. If the current year CPI is 140 and the base year CPI is 100, the price level has risen by (140 - 100) / 100 = 0.40, i.e., a 40% increase since the base year. This directly matches the interpretation of a CPI reading of 140.
Option 2: False. This would imply a different percentage change, such as a 60% increase or some other non-40% figure, which would only arise if the current CPI were 160 or if the base year were not 100. Since the calculation with 140 relative to 100 yields 40%, this option misstates the relationship between the current CPI and the base year.
In essence, the CPI ratio (current/base) minus 1 gives the percentage change in the price level since the base year, and here (140/100) - 1 equals 0.40, confirming a 40% increase.

If the current year CPI is 140, then the price level has increased 40 percent since the base year.

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