Question

Suppose the CPI from year 1 to year 2 increase from 210 to 228. What is the rate of price inflation? Provide your answer as a percent rounded to two decimal places. Do not include any symbols, such as "S," "=""%," or ","in your answer.

Answer 1

The rate of price inflation is 8.57%.

Step-by-step explanation:

Cost-push inflation occurs when overall prices increase (inflation) due to increases in the cost of wages and raw materials. Cost-push inflation can occur when higher costs of production decrease the aggregate supply (the amount of total production) in the economy.

The rate of price inflation can be calculated by finding the percentage change in the CPI (Consumer Price Index) from year 1 to year 2. To calculate this, we use the formula:

Inflation rate = (CPI2 - CPI1) / CPI1 * 100%

Using the given CPI values, the inflation rate would be:

(228 - 210) / 210 * 100% = 18 / 210 * 100% = 8.57% (rounded to two decimal places).

Inflation is the rate of increase in prices over a given period. Inflation is typically a broad measure, such as the overall increase in prices or the increase in the cost of living in a country.

A great example is oil, gasoline and the Organization of Petroleum Exporting Countries (OPEC). OPEC controls the majority of the world's oil reserves, and in 1973, it restricted production, causing prices to skyrocket 400%.