Over a ten-year period, the Consumer Price Index doubled. On the basis of this information and using the rule of 70, we can say that the average annual rate of inflation over this period was approximately:
A) 10 percent
B) 9 percent
C) 7 percent
D) 5 percent

Question

Quizplus · Accepted Answer

The rule of 70 states that if we divide 70 by the annual growth rate (in percent), we get the approximate time it takes for a quantity to double. In this case, since the CPI doubled over a ten-year period, we can set up the following equation:

70 / growth rate = 10

Solving for the growth rate, we get:

growth rate = 70 / 10 = 7

Therefore, the average annual rate of inflation over this period was approximately 7 percent.

Over a Ten-Year Period, the Consumer Price Index Doubled