ECONOMICS
INFLATION
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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A The price level rose by 8%.
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B The price level rose by more than 8%.
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C The real value of money rose by 8%.
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D The real value of money rose by more than 8%.
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Detailed explanation-1: -The rate of inflation To measure inflation, we look at the consumer price index (CPI) and how quickly it is rising. For example: In one year, the basket of goods and services the CPI uses costs $100. The next year, the same basket costs $102. That means the average annual rate of inflation is 2 percent.
Detailed explanation-2: -First, subtract the CPI from the beginning date (A) from the later date (B), and divide it by the CPI for the beginning date (A). Then multiply the result by 100 to get the inflation rate percentage.
Detailed explanation-3: -Different agencies’ predictions differ, putting US CPI inflation within the range of 7.0% to 8.1% percent in 2022 and around 2.8-3.5% in 2023. All agencies predicted that CPI inflation in 2023 will be 0.8-1.5% higher compared to the Federal Reserve target of 2%.
Detailed explanation-4: -Creeping inflation is a type of inflation in which the price level persistently rises over a period of time at a mild rate. During creeping inflation, the annual price rise varies between 2% to 3%. Creeping inflation is good for the economy as it creates demand.