In Nation A,the price index rises from 110 to 120 in a particular year.In the same year,the price level rises from 120 to 130 in Nation B.This means:
A) inflation in both nations is 10%.
B) Nation B suffers from hyperinflation.
C) both nations suffer from hyperinflation.
D) Nation A is experiencing inflation but Nation B is experiencing deflation.
E) Nation A is experiencing inflation of less than 9.1% and Nation B is experiencing inflation of less than 8.4%.

Question

Quizplus · Accepted Answer

To calculate the inflation rate, we need to use the formula:
Inflation rate = ((New Price Index - Old Price Index) / Old Price Index) x 100

For Nation A:
Inflation rate = ((120 - 110) / 110) x 100 = 9.09%

For Nation B:
Inflation rate = ((130 - 120) / 120) x 100 = 8.33%

Therefore, Nation A is experiencing inflation of less than 9.1% and Nation B is experiencing inflation of less than 8.4%. Hence, the correct answer is E.

In Nation A,the Price Index Rises from 110 to 120