If the price level is 100 in one year and rises to 102 the next year, then the inflation rate is
A)2.0 percent.
B)0.02 percent.
C)100 percent.
D)102 percent.
E)unable to be determined without knowing potential GDP.

Question

Quizplus · Accepted Answer

The inflation rate is calculated as the percentage change in the price level from one year to the next. The formula is: ((New Price Level - Old Price Level) / Old Price Level) * 100. So, ((102 - 100) / 100) * 100 = 2.0 percent.

If the Price Level Is 100 in One Year and Rises