Suppose the price index was 100 in 2004, 118 in 2005, and the inflation rate was lower between 2005 and 2006 than it was between 2004 and 2005. This means that

Question

Quizplus · Accepted Answer

The inflation rate from 2004 to 2005 was 18% (from 100 to 118). A lower inflation rate for 2005 to 2006 means the increase was less than 18%, so the price index in 2006 would be less than 118 * 1.18 = 139.24.

Suppose the Price Index Was 100 in 2004, 118 in 2005