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CA Foundation · Quantitative Aptitude · Index Numbers

In a town, the consumer price index (base 2015 = 100) was 250 in 2023. What does this value mean about the purchasing power of the rupee in 2023 relative to 2015?

The rupee in 2023 buys only 40% of what it bought in 2015. Purchasing power is the reciprocal of the price index, so 100 divided by 250 equals 0.40. Prices are 2.5 times the base level, so each rupee buys correspondingly less.

  1. AThe rupee buys 2.5 times as much as in 2015
  2. BThe rupee buys 40% of what it bought in 2015Correct
  3. CThe rupee buys 60% of what it bought in 2015
  4. DThe rupee buys 150% of what it bought in 2015

Explanation

Purchasing power of money is the reciprocal of the price index: 100/250 = 0.40, or 40% of the 2015 value. The option of 60% wrongly subtracts the 40% reduction from 100, and 2.5 times inverts the relationship.

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