Of the following sequences of price levels,which correctly represents a 5 percent inflation rate?
A) 100, 100, 100, 100
B) 100, 105, 105, 105
C) 100, 105, 110, 115
D) 100, 105, 110.25, 115.76

Question

Quizplus · Accepted Answer

To calculate the inflation rate, we need to compare the price level of a certain year to the previous year. 
So, using the formula: (New price level - Old price level) / Old price level x 100%, we have:
- For choice A: (100 - 100) / 100 x 100% = 0% inflation rate
- For choice B: (105 - 100) / 100 x 100% = 5% inflation rate (correct)
- For choice C: (105 - 100) / 100 x 100% = 5% inflation rate (incorrect)
- For choice D: (105 - 100) / 100 x 100% = 5% inflation rate (correct)
            (110.25 - 105) / 105 x 100% = 5% inflation rate (correct)
            (115.76 - 110.25) / 110.25 x 100% = 5% inflation rate (correct)

Therefore, the best choice(s) is D because it correctly represents a 5% inflation rate.

Of the Following Sequences of Price Levels,which Correctly Represents a 5