Suppose that the consumer price index (CPI) was 160 in 2010 and 166 in 2011, inflation during 2011 was
A) zero; prices were stable.
B) 3.8 percent.
C) 6 percent.
D) 66 percent.

Question

Quizplus · Accepted Answer

To calculate the inflation rate, we use the following formula:

Inflation rate = (CPI in Year 2 - CPI in Year 1) / CPI in Year 1 x 100

Plugging in the numbers, we get:

Inflation rate = (166 - 160) / 160 x 100
Inflation rate = 3.75%

Rounding to one decimal place, we get an inflation rate of 3.8%, which corresponds to choice B.

Suppose That the Consumer Price Index (CPI) Was 160 in 2010