Suppose that the CPI today is 120 and that it was 80 five years ago. Then, in today's prices something that cost $1 five years ago now costs $1.50.

Question

Quizplus · Accepted Answer

To find out the inflation rate between two time periods, we can use the formula: 
Inflation rate = ((CPI in current year - CPI in earlier year) / CPI in earlier year) x 100%
Using the given values, we can calculate the inflation rate as:
((120 - 80) / 80) x 100% = 50%
This means that the overall price level has increased by 50% in the past five years. Therefore, if something cost $1 five years ago, its price in today's dollars would be:
1 + (1 x 0.5) = $1.50
So, the statement is true.

Suppose That the CPI Today Is 120 and That It