Economics Semester Exam

Question

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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?(1 point)
Responses

-4.8%
-4.8%

4.8%
4.8%

0.05%
0.05%

4.5%

Answer 1

To find the rate of inflation from Year One to Year Two using the Consumer Price Index (CPI), you can use the following formula:

\[ \text{Inflation Rate} = \left(\frac{\text{CPI in Year Two} - \text{CPI in Year One}}{\text{CPI in Year One}}\right) \times 100 \]

Substituting the given values:

\[ \text{Inflation Rate} = \left(\frac{110 - 105}{105}\right) \times 100 \]

\[ \text{Inflation Rate} = \left(\frac{5}{105}\right) \times 100 \]

\[ \text{Inflation Rate} \approx 4.76% \]

Rounding it off gives approximately 4.8%.

Therefore, the correct response is 4.8%.