Question

If the cpi is 120 in year 1 and 150 in year 2, then the rate of inflation from year 1 to year 2 is:

Answer 1

The inflation can be measured by the percentage of change in the CPI.

From the givens:
The change between year 1 and year 2 = 150 - 120 = 30
Now, the percentage of change can be calculated as follows:
% of change = (change in CPI/original CPI) * 100
% of change = (30/120) * 100 = 25%

From, the definition, inflation is measured as the percentage in change of CPI, therefore, inflation = 25%