Question

Suppose the value of a price index is 60 in 2008 and 75 in 2009. What is the rate of inflation from 2008 to 2009?

(A) 5%
(B) 10%
(C) 15%
(D) 20%
(E) 25%

Answer 1

The rate of inflation from 2008 to 2009 is calculated using the percentage change formula, resulting in a 25% rate of inflation, which is option (E).

Step-by-step explanation:

To calculate the rate of inflation from 2008 to 2009 using the given price index values of 60 in 2008 and 75 in 2009, we can use the percentage change formula:

Inflation Rate = ((Price Index in 2009 - Price Index in 2008) / Price Index in 2008) x 100%

Substituting the given values we get:

Inflation Rate = ((75 - 60) / 60) x 100% = (15 / 60) x 100% = 0.25 x 100% = 25%

Therefore, the rate of inflation from 2008 to 2009 is 25%, which corresponds to option (E).