Suppose the CPI last year is 121 and the CPI this year is 137.The correct method to calculate the inflation rate is
A) (137 - 121)/100 = 0.16.
B) 137 × 121 = 258.
C) [(137 - 121)/121] × 100 = 13.2.
D) (137/121) × 100 = 113.2.

Question

Quizplus · Accepted Answer

The correct method to calculate the inflation rate is to use the formula [(Current year CPI - Base year CPI)/Base year CPI] × 100. Substituting the values, [(137-121)/121] × 100 gives the inflation rate of 13.2%. Option A is incorrect because it doesn't multiply by 100. Option B is incorrect because it's a multiplication of the two indices, which doesn't give the inflation rate. Option D is incorrect because it calculates the increase in the index as a percentage of the base year CPI, which is not the correct formula for calculating inflation rate.

Suppose the CPI Last Year Is 121 and the CPI