The price index of 130 indicates that prices are 30 percent higher than in the base year (option c). Here’s why:
The price index measures the relative change in price levels over time. When we say the price index is 130, it means that the current price level is 130% of the price level in the base year. To break it down further, the additional 30% signifies that there has been a 30% increase from the base year’s prices.
For instance, if an item cost $100 in the base year, it would cost $130 in the current year based on the index. Therefore, the correct interpretation of a price index of 130 is that prices are indeed 30% higher than they were in the base year.