Final answer:
The inflation rate, calculated as the percentage change in the price level, increased from 120 to 126 is found to be 5 percent. This is determined by using the percentage change formula and results in the selection of option b. 5 percent as the correct answer.
Step-by-step explanation:
If the price level increased from 120 to 126, the inflation rate can be calculated using the formula for percentage change, which is: ((new value - original value) / original value) * 100%. Applying this formula gives us ((126 - 120) / 120) * 100%, which equals (6 / 120) * 100%, and further simplifies to 0.05 * 100%, resulting in a 5 percent inflation rate. Therefore, the correct answer is b. 5 percent.
It's important to note that the inflation rate is not simply the difference in the index number, but rather the percentage change in the price level between two periods. In the provided examples, although the index number changes by the same amount, the base on which the percentage is calculated changes, leading to different inflation rates, which shows that the inflation rate calculated as a percentage change does not remain constant even if the numerical change in the index is the same.