Question

If your expenses total $21000 in Year 1 and you expect inflation rate to be 2 percent, how much more will you have to spend to buy the same goods and services in Year 2, assuming that all your expenses increase at the same rate as inflation?

Answer 1

$21,420

Step-by-step explanation:

The total expense in year 1 was $21000

the inflation rate is 2 percent. it means prices will increase by 2 percent.

The amount to be spent in year 2 will be more by 2% than year 1

If year expenses are 100%, year 2 expenses will be 102%

Actual year 2 expense will be 102% of $21,000

=102/100 x $21,000

=1.02 x $21,000

=$21,420