Provide an appropriate response.
-The Consumer Price Index is increasing at a rate of 5% per year. By what factor will prices increase in 2 years? Use the approximate doubling time formula (rule of 70).
A)5.1
B)20
C)1
D)1.1

Question

Quizplus · Accepted Answer

The Consumer Price Index (CPI) increasing at a rate of 5% per year means prices will increase by approximately 10% over 2 years (5% per year x 2 years). To find the factor by which prices increase, you add this increase to 1 (representing the original amount), resulting in 1.10 or 1.1. The rule of 70 is not directly applicable here; it's used to estimate the doubling time of an investment or inflation, not the factor by which prices increase over a specific period.

Provide an Appropriate Response