Figure 15-4

-Refer to Figure 15-4.Given the economy is at point A in year 1,what is the inflation rate between year 1 and year 2?
A) 0.9%
B) 1.8%
C) 2.7%
D) 3.0%

Question

Figure 15-4
 
-Refer to Figure 15-4.Given the economy is at point A in year 1,what is the inflation rate between year 1 and year 2?
A) 0.9% 
B) 1.8% 
C) 2.7% 
D) 3.0%

Quizplus · Accepted Answer

To find the inflation rate, we need to compare the price level from year 1 to year 2. The price level for year 1 is 110 and for year 2 it is 112.2 (moving along the vertical axis to point B).

Using the inflation rate formula:
Inflation rate = (price level in year 2 - price level in year 1)/price level in year 1 x 100%
Inflation rate = (112.2-110)/110 x 100% = 1.8%

Therefore, the best choice is B, with the explanation that we calculated the inflation rate using the formula and comparing the price level in year 1 and year 2.

Figure 15-4 -Refer to Figure 15-4.Given the Economy Is at Point a Is