If the consumer price index is 105 in Year One and 110 in Year Two, what is the rate of inflation fron Year One to Year Two?

Question

A. -4.8%
B. 4.8%
C. 0.05%
D. 4.5%

Answer 1

To find the rate of inflation from Year One to Year Two, you subtract the initial CPI from the final CPI and then divide by the initial CPI.

Rate of inflation = (final CPI - initial CPI) / initial CPI

Rate of inflation = (110 - 105) / 105

Rate of inflation ≈ 0.0476

So, the rate of inflation from Year One to Year Two is approximately 0.0476, which is equal to 4.8%.

Therefore, the correct answer is B. 4.8%.