At the end of last year the Consumer Price Index was equal to 163.8 and at the end of this year it was equal to 157.5.What is the inflation rate over this time period?
A) 6.3 percent
B) 4.0 percent
C) 3.85 percent
D) 10.1 percent

Question

Quizplus · Accepted Answer

To calculate the inflation rate, we use the formula:
Inflation rate = ((new CPI - old CPI)/old CPI) x 100%

Substituting the values:
Inflation rate = ((157.5 - 163.8)/163.8) x 100%
Inflation rate = (-6.3/163.8) x 100%
Inflation rate = -0.0384 x 100%
Inflation rate = -3.84%

However, this gives us a negative value, which doesn't make sense. This means that prices have actually decreased from last year to this year. So we need to take the absolute value of the inflation rate, which gives us:
Inflation rate = 3.84%

The closest option to this value is B) 4.0 percent.

At the End of Last Year the Consumer Price Index