If the price level is 100 in one year and rises to 102 the next year, then the inflation rate is
A) 0.02 per cent.
B) 100 per cent.
C) 2.0 per cent.
D) 102 per cent.
E) unable to be determined without knowing potential GDP.

Question

Quizplus · Accepted Answer

The inflation rate is calculated as the percentage change in the price level from one year to the next. In this case, it is ((102 - 100) / 100) * 100 = 2.0 per cent.

If the Price Level Is 100 in One Year and Rises