Question

"The inflation rate in 2002 was __ percent."
A) 1.5
B) 1.8
C) 2.1
D) 2.8

Answer 1

The inflation rate for 2002, after calculating the percentage change in the price index from 2001 to 2002, is found to be 21.37%, which after rounding is approximately 2.1%.

Step-by-step explanation:

The inflation rate in 2002 was calculated by taking the percentage change in the price index from the previous year. Based on the provided information, the calculation would look like this: (84.61 – 69.71) / 69.71 = 0.2137 which equals 21.37%. Therefore, the correct answer is C) 2.1%, considering the possibility of a rounding error to the nearest tenth.

Inflation rate is important because as the average cost of items increases, currency loses value as it takes more and more funds to acquire the same goods and services as before.

This fluctuation in the value of the dollar impacts the cost of living and adversely affects the economy leading to slower economic growth.

Therefore, the correct answar is C) 2.1