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QUESTION:

Use the following table to answer the question. The table shows the prices and the quantities consumed in Vegetarian Country. Suppose the base year is 2020. Also, suppose that 2020 is the year the typical consumption basket was determined, so the quantities consumed in 2020 are the only quantities needed to calculate the CPI in each year.

YearPrice of CarrotsQuantity of CarrotsPrice of CeleryQuantity of Celery
2020$2.00100$1.00100
2021  2.50  90  0.90120
2022  2.75105  1.00130

What is the inflation rate for 2022?


ANSWER:

rom the previous calculations:

  • CPI in 2021 = 113.3
  • CPI in 2022 = 125

Now, calculate the inflation rate for 2022:

Inflation Rate in 2022=125−113.3113.3×100=11.7113.3×100≈10.3%\text{Inflation Rate in 2022} = \frac{125 - 113.3}{113.3} \times 100 = \frac{11.7}{113.3} \times 100 \approx 10.3\%

Final Answer:

The correct answer is b. 10.3 percent.


Posted by Cleveland on September 9, 2024
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