The rate of inflation can be found by subtracting:
A)real income from nominal income
B)last year's price index from this year's price index
C)this year's price index from last year's price index, and dividing the difference by this year's price index
D)last year's price index from this year's price index, and dividing the difference by last year's price index
E)this year's price index from last year's price index, and dividing the difference by last year's price index

Question

Quizplus · Accepted Answer

The rate of inflation is the percentage change in the general price level, which can be measured by comparing the price index of two different periods. The most common method is to calculate the percentage change in the price index from the previous period, which is the difference between last year's price index and this year's price index, and dividing by last year's price index. This method reflects the increase in prices from the prior year to the current year. Therefore, the correct choice is D.

The Rate of Inflation Can Be Found by Subtracting