Assume tuition at Houston Community College cost $588 (per semester)in 2004 and $813 in 2012.If the price index was 184 in 2004 and 226 in 2012,then we could say
A) tuition has increased more slowly than inflation.
B) tuition has increased more rapidly than inflation.
C) tuition has increased at about the same rate as inflation.
D) nominal tuition has decreased.
E) tuition suffers from menu costs due to inflation.

Question

Quizplus · Accepted Answer

We can calculate the inflation rate from 2004 to 2012 as follows:

Inflation rate = ((Price index in 2012 - Price index in 2004) ÷ Price index in 2004) x 100%
Inflation rate = ((226 - 184) ÷ 184) x 100%
Inflation rate = 22.83%

Therefore, prices overall increased by 22.83% from 2004 to 2012. Since tuition at Houston Community College increased by a greater percentage (38.1%), we can conclude that tuition has increased more rapidly than inflation.

Assume Tuition at Houston Community College Cost $588 (Per Semester)in