Of the following sequences of price levels, which correctly represents a 5 percent inflation rate?
A)100, 100, 100, 100
B)100, 105, 105, 105
C)100, 105, 110, 115
D)100, 105, 110.25, 115.76
E)95, 100, 105, 110

Question

Quizplus · Accepted Answer

A 5 percent inflation rate means that prices increase by 5 percent from the previous year. Option D shows a consistent increase of 5 percent from the base price of 100, leading to the final price of 115.76. The other options either do not show a consistent increase or do not result in a final price that is 5 percent higher than the original.

Of the Following Sequences of Price Levels, Which Correctly Represents