A price index with a base year of 100 stood at 125 last year and stands at 140 this year. By what percentage have prices increased between last year and this year?
Answer and explanation
Correct answer: B. 12.0%
- Step 1: Increase = 140 − 125 = 15 index points.
- Step 2: Percentage = 15 ÷ 125 = 12.0%.
Answer
12.0%.
Why not the others: 40.0%: This is the increase since the base year, not since last year. 15.0%: This is the difference in index points, not a percentage of last year's level. 10.7%: This divides the increase by this year's index (15 ÷ 140) instead of last year's.
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