Question

Suppose in year 1 the CPI is 90, in year 2 the CPI is 100, and in year 3 the CPI is 110. Then, inflation is

Answer 1

Answer: E) Both answers B and D are correct.

Explanation:

Inflation using the Consumer Price Index is calculated by;

= (CPI in current year - CPI in previous year) / CPI in previous year

Year 2 Inflation = (100 - 90) / 90

= 11%

Year 3 Inflation = (110 - 100) / 100

= 10%