Suppose the GDP implicit price deflator was 112.7 in 2011 and 116.0 in 2012.Therefore,the inflation rate in 2012 would be
A) 2.8%.
B) 2.9%.
C) 3.3%.
D) 16%.

Question

Quizplus · Accepted Answer

Using the formula for inflation rate: 
Inflation rate = [(GDP deflator in year 2 - GDP deflator in year 1) / GDP deflator in year 1] x 100

Plugging in the numbers we get: 
Inflation rate = [(116.0 - 112.7) / 112.7] x 100 
Inflation rate = (3.3 / 112.7) x 100 
Inflation rate = 2.93

Rounding to one decimal place, the inflation rate in 2012 is 2.9%, which corresponds to answer choice B.

Suppose the GDP Implicit Price Deflator Was 112