CPI ACTUAL TEST PAPER 2026 COMPLETE QUESTIONS AND CORRECT ANSWERS GRADED A+

CPI ACTUAL TEST PAPER 2026 COMPLETE
QUESTIONS AND CORRECT ANSWERS
GRADED A+

●● What is the basis for cost of living adjustments (COLAs)?.
Answer: The Consumer Price Index (CPI).


●● What is the first step in calculating the CPI?.
Answer: Fix the 'basket' by surveying consumers to determine what's in
the typical consumer's shopping basket.


●● What does the Bureau of Labor Statistics (BLS) do in the CPI
calculation?.
Answer: Collects data on the prices of all goods in the basket.


●● How is the cost of the CPI basket computed?.
Answer: By using the prices to compute the total cost of the basket.


●● What is the formula to compute the CPI for any year?.
Answer: CPI = 100 x (cost of basket in current year / cost of basket in
base year).

, ●● How is the inflation rate calculated from the CPI?.
Answer: Inflation rate = [(CPI this year - CPI last year) / CPI last year] x
100%.


●● What was the CPI in 2016 if the cost of the basket was $60?.
Answer: CPI in 2016 = 100 x ($60/$60) = 100.


●● What was the CPI in 2017 if the cost of the basket was $69?.
Answer: CPI in 2017 = 100 x ($69/$60) = 115.


●● What was the CPI in 2018 if the cost of the basket was $78?.
Answer: CPI in 2018 = 100 x ($78/$60) = 130.


●● What is substitution bias in relation to the CPI?.
Answer: It refers to the CPI's failure to account for consumers
substituting towards cheaper goods, which can overstate cost of living
increases.


●● How does the introduction of new goods affect the CPI?.
Answer: It increases variety and allows consumers to find products that
better meet their needs, which the CPI misses, overstating cost of living
increases.