If the price level increased from 120 to 144, then what was the inflation rate?

Question

a. 25 percent
b. 17 percent
c. 20 percent
d. 24 percent

Answer 1

To calculate the inflation rate, you can use the formula:

\[ \text{Inflation Rate} = \frac{\text{New Price Level} - \text{Old Price Level}}{\text{Old Price Level}} \times 100 \]

In this case, the old price level is 120, and the new price level is 144. Plugging in the values:

\[ \text{Inflation Rate} = \frac{144 - 120}{120} \times 100 = \frac{24}{120} \times 100 = 20% \]

So the inflation rate is 20 percent (c).