During a certain year,the nominal interest rate was 8 percent,the real interest rate was 3 percent,and the CPI was 176.7 at the beginning of the year.The CPI at the end of the year was
A)196.1.
B)185.5.
C)168.3.
D)159.2.

Question

Quizplus · Accepted Answer

To find the change in CPI, we use the formula:

% change in CPI = (Ending CPI - Beginning CPI) / Beginning CPI * 100

We know that the real interest rate is equal to the nominal interest rate minus the inflation rate.

3 = 8 - Inflation rate

Inflation rate = 5

Using the above formula we can find the ending CPI:

% change in CPI = (Ending CPI - 176.7) / 176.7 * 100 = 5

Simplifying the above equation, we get:

Ending CPI = 176.7 * (1 + 5/100) = 185.5

Therefore, the answer is B, 185.5.

During a Certain Year,the Nominal Interest Rate Was 8 Percent,the