Suppose the GDP implicit price deflator was 112.7 in 2005 and 116.0 in 2006. Therefore, the inflation rate in 2006 would be
A)2.8%.
B)2.9%.
C)3.3%.
D)16%.

Question

Quizplus · Accepted Answer

The inflation rate can be calculated as:

Inflation rate = (GDP deflator in year 2 - GDP deflator in year 1) / GDP deflator in year 1 * 100%

In this case, the inflation rate in 2006 would be:

(116.0 - 112.7) / 112.7 * 100% = 2.9%

Therefore, the best choice is B.

Suppose the GDP Implicit Price Deflator Was 112