Between 1980 and 2000, the price level approximately doubled. The average annual rate of inﬂation over this 20-year period was about
A) 5.5 percent.
B) 4.7 percent.
C) 3.5 percent.
D) 2.8 percent.

Question

Quizplus · Accepted Answer

To find the average annual rate of inflation we use the formula (ending level/start level)^(1/number of years) - 1. In this case, (ending level/start level)^(1/20) - 1 = (2^(1/20)) - 1 ≈ 0.035 or 3.5%. Therefore, the best choice is C.

Between 1980 and 2000, the Price Level Approximately Doubled