If the price index is P1 in one year and P2 in the next year,the inflation rate from one year to the next is calculated as
A)(P2 - P1)× 100.
B)(P2/P1)× 100.
C)(P1/P2)× 100.
D)[(P2 - P1)/P1] × 100.
E)[(P1 - P2)/P2] × 100.

Question

Quizplus · Accepted Answer

The inflation rate is calculated as the percentage change in price index from one year to the next. The formula for percentage change is [(final value - initial value)/initial value] × 100. Therefore, the correct formula for calculating inflation rate is [(P2 - P1)/P1] × 100, which is option D.

If the Price Index Is P1 in One Year and P2