Using the notation P_tto designate this periodʹs price level and P_t_-₁to designate last periodʹs price level, the formula for measuring the inflation rate from last period to this period is A) [P_t_-₁- P_t) / P_t] × 100. B) [P_t- P_t_-₁) / P_t] × 100. C) [P_t- P_t_-₁) / P_t_-₁] × 100. D) [P_t_-₁- P_t) / P_t_-₁] × 100.

Question

Quizplus · Accepted Answer

The formula for measuring inflation rate is the difference between this period's price level and last period's price level divided by last period's price level, multiplied by 100. Using the given notation, the formula can be written as [(P_t-₁)/(P_t_-₁)] x 100. Simplifying the numerator gives (P_t-₁) and dividing by the denominator results in Choice C.

Using the Notation Pt to Designate This Periodʹs Price Level

Using the Notation P_tto Designate This Periodʹs Price Level