If the price level increases from 200 in year 1 to 220 in year 2, the rate of inflation from year 1 to year 2 is ________.

Question

Quizplus · Accepted Answer

The rate of inflation is calculated as the percentage increase in price level.

In this case, the price level has increased from 200 to 220, which is a $20 increase.

To calculate the rate of inflation, we divide the increase by the original price level and multiply by 100:

20/200 x 100 = 10 percent

Therefore, the rate of inflation from year 1 to year 2 is 10 percent.

If the Price Level Increases from 200 in Year 1