Question

I’m stuck on this question…

Suppose the consumer price index (CPI) stands at 250 this year. If the inflation rate is 30 percent, then next year’s CPI will equal:

A)275
B)None of the answers are correct
C)225
D)325

Answer 1

Next year's CPI will be 325.

To calculate, first find the amount of the increase by multiplying the current CPI by the inflation rate:

250 x 0.30 = 75

Then, add the increase to the current CPI:

250 + 75 = 325