Question

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

Answer 1

Inflation rate = (CPI₂ − CPI₁) / CPI₁ × 100% = (110 − 105) / 105 × 100% = 5/105 × 100% ≈ 4.76%.