The price index was 150 in the first year,160 in the second year,and 165 in the third year.Which of the following statements is correct?
A)The price level was higher in the second year than in the first year,and it was higher in the third year than in the second year.
B)The inflation rate was positive between the first and second years,and it was positive between the second and third years.
C)The inflation rate was lower between the second and third years than it was between the first and second years.
D)All of the above are correct.

Question

Quizplus · Accepted Answer

A) The price level did increase from year 1 to year 2 and from year 2 to year 3, so this statement is correct.
B) The inflation rate can be calculated as the percentage increase in price level from one year to the next. Between the first and second years, the inflation rate was (160-150)/150 * 100% = 6.7%. Between the second and third years, the inflation rate was (165-160)/160 * 100% = 3.1%. Both of these rates are positive, so this statement is correct.
C) The inflation rate was higher between the first and second years (6.7%) than it was between the second and third years (3.1%), so this statement is incorrect.
Therefore, only statement D is correct.

The Price Index Was 150 in the First Year,160 in the Second