Question
The price index was 120 in Year 1 and 126 in Year 2. What was the inflation rate?
a.
7.2%
b.
5%
c.
105%
d.
6%
a.
7.2%
b.
5%
c.
105%
d.
6%
Answers
GPT-4o mini
To calculate the inflation rate between Year 1 and Year 2 based on the price index, you can use the following formula:
\[
\text{Inflation Rate} = \left( \frac{\text{Price Index in Year 2} - \text{Price Index in Year 1}}{\text{Price Index in Year 1}} \right) \times 100
\]
Substituting the values:
\[
\text{Inflation Rate} = \left( \frac{126 - 120}{120} \right) \times 100
\]
Calculating the numerator:
\[
126 - 120 = 6
\]
Now, substituting back into the formula:
\[
\text{Inflation Rate} = \left( \frac{6}{120} \right) \times 100 = 0.05 \times 100 = 5\%
\]
Therefore, the inflation rate is **5%** (option b).
\[
\text{Inflation Rate} = \left( \frac{\text{Price Index in Year 2} - \text{Price Index in Year 1}}{\text{Price Index in Year 1}} \right) \times 100
\]
Substituting the values:
\[
\text{Inflation Rate} = \left( \frac{126 - 120}{120} \right) \times 100
\]
Calculating the numerator:
\[
126 - 120 = 6
\]
Now, substituting back into the formula:
\[
\text{Inflation Rate} = \left( \frac{6}{120} \right) \times 100 = 0.05 \times 100 = 5\%
\]
Therefore, the inflation rate is **5%** (option b).