Exhibit 13-2 Consumer Price Index

-As shown in Exhibit 13-2,the rate of inflation for Year 3 is:
A) 5 percent.
B) 10 percent.
C) 20 percent.
D) 25 percent.

Question

Exhibit 13-2 Consumer Price Index
 
-As shown in Exhibit 13-2,the rate of inflation for Year 3 is:
A) 5 percent. 
B) 10 percent. 
C) 20 percent. 
D) 25 percent.

Quizplus · Accepted Answer

The rate of inflation for Year 3 is calculated as (CPI for Year 3 - CPI for Year 2) / CPI for Year 2. From Exhibit 13-2, we can see that the CPI for Year 2 is 100 and the CPI for Year 3 is 105. Therefore, the rate of inflation for Year 3 is (105 - 100) / 100 = 0.05, or 5%.