If the consumer price index (CPI)is 220 one year and 210 the next,the annual rate of inflation as measured by the CPI is approximately _____.
A)−2.3 percent
B)−4.6 percent
C)10 percent
D)4.8 percent
E)220 percent

Question

Quizplus · Accepted Answer

The formula for calculating the inflation rate based on CPI is:
(In Year 2 CPI - In Year 1 CPI) / In Year 1 CPI x 100%
So, plugging in the values from the question:
(210 - 220) / 220 x 100% = -4.5%
Since the CPI decreased, this represents deflation, so the annual rate of deflation would be approximately 4.5%. Rounded up, this corresponds to answer choice B, -4.6 percent.

If the Consumer Price Index (CPI)is 220 One Year and 210