Question

Suppose that the consumer price index equaled 177.1 in 2001 and 179.9 in 2002. The rate of inflation between these two years thus equaled


1.6 percent


2.8 percent


3.3 percent


4.1 percent

Answer 1

To calculate the rate of inflation between two years using the Consumer Price Index (CPI), you can use the following formula:

\[
\text{Inflation Rate} = \left( \frac{\text{CPI}_{\text{new}} - \text{CPI}_{\text{old}}}{\text{CPI}_{\text{old}}} \right) \times 100
\]

In this case, the CPI in 2001 (\(\text{CPI}_{\text{old}}\)) is 177.1, and the CPI in 2002 (\(\text{CPI}_{\text{new}}\)) is 179.9. Plugging in these values:

\[
\text{Inflation Rate} = \left( \frac{179.9 - 177.1}{177.1} \right) \times 100
\]

Calculating the difference in CPI:

\[
179.9 - 177.1 = 2.8
\]

Now, plug that into the equation:

\[
\text{Inflation Rate} = \left( \frac{2.8}{177.1} \right) \times 100
\]

Now calculate \(\frac{2.8}{177.1}\):

\[
\frac{2.8}{177.1} \approx 0.0158
\]

Now multiplying by 100 to get the percentage:

\[
0.0158 \times 100 \approx 1.58\%
\]

Rounded to one decimal place, the rate of inflation is approximately **1.6 percent**.

So, the answer is:

**1.6 percent**