The table below shows the price index for Zimbabwe starting in 2000. Which of the following statements correctly describe the behavior of prices in Zimbabwe?
I. The cost of the CPI basket increased.
II. The inflation rate was 73.4 percent between 2000 and 2001.
A) I only
B) II only
C) neither I nor II
D) both I and II

Question

The table below shows the price index for Zimbabwe starting in 2000.  Which of the following statements correctly describe the behavior of prices in Zimbabwe?
I. The cost of the CPI basket increased.
II. The inflation rate was 73.4 percent between 2000 and 2001.
A) I only 
B) II only 
C) neither I nor II 
D) both I and II

Quizplus · Accepted Answer

I. The cost of the CPI basket increased as shown by the increase in the price index from year to year.
II. Inflation rate is calculated as the percentage increase in the price index from one year to the next. Using the data in the table, we can calculate the inflation rate between 2000 and 2001 as (4,710-2,720)/2,720 x 100% = 73.4%. Therefore, statement II is also correct.

The Table Below Shows the Price Index for Zimbabwe Starting