Assume tuition at the University of Virginia cost $2,962 (per semester)in 2004 and $11,584 in 2012.If the price index was 184 in 2004 and 226 in 2012,then we could say
A) tuition has increased more slowly than inflation.
B) tuition has increased much more rapidly than inflation.
C) tuition has increased at about the same rate as inflation.
D) nominal tuition has decreased.
E) tuition suffers from menu costs due to inflation.

Question

Quizplus · Accepted Answer

We can calculate the percentage increase in tuition using the price index:
Percentage increase = [(New price index - Old price index) / Old price index] x 100
= [(226 - 184) / 184] x 100
= 23.91%
So tuition has increased by almost 24%, which is much more rapid than the increase in inflation (which is approximately 22%). Therefore, the answer is B.

Assume Tuition at the University of Virginia Cost $2,962 (Per