Question

The price index was 120 in 2012 and 126 in 2013. what was the inflation rate?

a. 7.2 percent
b. 5.0 percent
c. 105 percent
d. 6.0 percent

Answer 1

That would be (126 - 120) / 120 = 5/120 = 5%

Its b

Answer 2

b. 5.0 percent

Explanation:

We have been given that the price index was 120 in 2012 and 126 in 2013. We are asked to find the inflation rate.

`\text{Inflation}=\frac{\text{Price Index in current year-Price Index in base year}}{\text{Price index in base year}}* 100`

`\text{Inflation}=(126-120)/(120)* 100`

`\text{Inflation}=(6)/(120)* 100`

`\text{Inflation}=(1)/(20)* 100`

`\text{Inflation}=5`

Therefore, the inflation rate was 5% and option 'b' is the correct choice.