Question

For an imaginary economy, the value of the consumer price index was 138.75 in 2016, and the inflation rate was 10 percent between 2015 and 2016. The consumer price index in 2015 was

Answer 1

Answer:

126.14

Explanation:

Assume Consumer Price Index (CPI) for 2015 to be X

With 2016 CPI at 138.75, and a 10% inflation rate, the relationship showing the growth from 2015 to 2016

= CPI.2015 * (1 + growth rate) = CPI.2016

= CPI.2015 * 1.10 = 138.75

= CPI.2015 = 138.75/1.1

= CPI.2015 = 126.14.

Therefore, 2015 Consumer Price Index = 126.14.