If the price index is P₁ in one year and P₂ in the next year,the inflation rate from one year to the next is calculated as A)(P₂ - P₁)× 100. B)(P_2/P₁)× 100. C)(P_1/P₂)× 100. D)[(P₂ - P₁)/P₁] × 100. E)[(P₁ - P₂)/P₂] × 100.

Question

Quizplus · Accepted Answer

The inflation rate is the percentage change in the price index from one year to the next, which is given by [(P₂ - P₁)/P₁] × 100. Option A and E are incorrect as they have the subtraction order and denominator wrong. Option B and C have the denominator and numerator in the wrong position.

If the Price Index Is P1 in One Year and P2

If the Price Index Is P₁ in One Year and P₂