Question

price index was 128 in Year 2, and the inflation rate was 24 percent between Year I and Year 2. The price index in Year 2 was O a. 152.0 O b. 158.7. c. 104.0. O d. 103.2

Answer 1

The price index in Year 2, we multiply the price index in Year 1 by 1 plus the inflation rate. In this case, the price index in Year 2 is 158.7.

Step-by-step explanation:

The inflation rate is calculated as the percentage change in the price index from year to year. To calculate the price index in Year 2, we need to first determine the inflation rate between Year 1 and Year 2. Given that the inflation rate was 24 percent, we can use this information to find the new price index in Year 2.

To calculate the new price index, we can use the formula:
Price index in Year 2 = Price index in Year 1 * (1 + inflation rate)

Plugging in the values, we have:
Price index in Year 2 = 128 * (1 + 0.24) = 128 * 1.24 = 158.7

Answer 2

To find the Year 1 price index with a Year 2 index of 128 and an inflation rate of 24%, divide 128 by 1.24 to get approximately 103.2, which matches answer choice (d).

Step-by-step explanation:

The question asked is attempting to determine the price index in Year 1, given that the price index in Year 2 is 128 and the inflation rate between Year 1 and Year 2 is 24 percent. To find the price index for Year 1, we use the concept that the inflation rate is the percentage change in the price index from one year to the next. To calculate the original index (Year 1), we divide the Year 2 index by 1 plus the rate of inflation expressed as a decimal.

Thus, the calculation is:

Price Index in Year 1

= Price Index in Year 2 / (1 + Inflation Rate)

Substitute the known values:

Price Index in Year 1 = 128 / (1 + 0.24)

Price Index in Year 1 = 128 / 1.24

Price Index in Year 1 = 103.2258

This means the correct answer is (d) 103.2, when rounded to one decimal place.