If the price level rose in three consecutive years from 100 to 120 to 140, then the annual inflation rate over those years would
A)increase.
B)remain the same.
C)decrease.
D)equal 20%.
E)cannot be determined.

Question

Quizplus · Accepted Answer

The annual inflation rate increases because the percentage change from 100 to 120 is 20%, but the percentage change from 120 to 140 is higher at 16.67%. This indicates an increasing trend in the inflation rate when viewed as a percentage of the previous year's price level.

If the Price Level Rose in Three Consecutive Years from 100