If the price level rose in three consecutive years from 100 to 120 to 140,then the annual inflation rate over those years would
A)increase.
B)remain the same.
C)decrease.
D)equal 20%.

Question

Quizplus · Accepted Answer

The annual inflation rate would decrease. Inflation rate is calculated as the percentage change in the price level from one year to the next. Therefore, the inflation rate between year 1 and 2 would be (120-100)/100 = 20%, and the inflation rate between year 2 and 3 would be (140-120)/120 = 16.67%. Since the inflation rate is decreasing over time, the answer is (C) decrease.

If the Price Level Rose in Three Consecutive Years from 100