ECONOMICS
INFLATION
Question
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The CPI in year 1 is 103 and in year 2 is 99. The inflation rate in year 2 is

3.9%


4.1%


4.0%


2.8%


+4.0%

Explanation:
Detailed explanation1: 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 explanation2: To find the CPI in any year, divide the cost of the market basket in year t by the cost of the same market basket in the base year. The CPI in 1984 = $75/$75 x 100 = 100 The CPI is just an index value and it is indexed to 100 in the base year, in this case 1984. So prices have risen by 28% over that 20 year period.
Detailed explanation3: If the consumer price index (CPI) in Year 1 was 200 and the CPI in Year 2 was 215, the rate of inflation is: a. 215 percent.
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