If 2004 is the base year, then the inflation rate for 2005 equals

Question

Quizplus · Accepted Answer

The formula for calculating the inflation rate is the percentage change in CPI from one year to another. In this case, we want to calculate the inflation rate for 2005 compared to the base year of 2004. Therefore, we use the formula:

Inflation rate for 2005 = (CPI in 2005 - CPI in 2004) / CPI in 2004 * 100

This means we take the difference between the CPI in 2005 and the CPI in 2004, divide it by the CPI in 2004 (our base year), and then multiply by 100 to get the percentage change. Option A matches this formula, so it is the correct choice. Option B is incorrect because it uses CPI in 2005 as the denominator, which is not correct for calculating the inflation rate. Options C and D are both incorrect because they subtract the CPI in 2005 from the CPI in 2004, which is the opposite of what we want to do for calculating inflation.

If 2004 Is the Base Year, Then the Inflation Rate CPI in 2005− CPI in 2004 CPI in 2004×100\frac { \text { CPI in } 2005 - \text { CPI in } 2004 } { \text { CPI in } 2004 } \times 100 CPI in 2004 CPI in 2005− CPI in 2004​×100

If 2004 Is the Base Year, Then the Inflation Rate $\frac { \text { CPI in } 2005 - \text { CPI in } 2004 } { \text { CPI in } 2004 } \times 100$