Question

The index number representing the price level changes from 109 to 118 in one year. The inflation rate during the year is _____ percent. Round your answer to two digits to the right of the decimal

Answer 1

The price levels given are:

`Initial=109`
`final=118`

The inflation rate can be calculated using the relationship

`\begin{gathered} \frac{\text{price level change}}{initial\text{ }price}*100\text{ \%} \\ \\ =\frac{\text{final price-initial price}}{i\text{nitial price}}*100\text{ \%} \end{gathered}`

Substituting the values into the formula we will have

`(118-109)/(109)*100\text{ \%}`

Simplifying further, we will have

`8.26\text{ \%}`

Thus, we have the inflation rate to be:

8.26 percent