Question

In the year 2000, the economy produces 50 loaves of bread that sell for $1 each. In the year 2001, the economy produces 100 loaves of bread that sell for $3 each. In the year 2002, the economy produces 200 loaves of bread that sell for $4 each. What is the inflation rate for 2001 & 2002 (Use 2001 as the base year)?

Answer 1

inflation 2001 is = 0 %

inflation for 2002 = 33.33%

Step-by-step explanation:

given data

economy produces = 50 loaves

sell = $1 each

produces = 100 loaves

sell = $3 each

produces = 200 loaves

sell = $4 each

solution

we get here inflation rate for 2001 & 2002 with Using 2001 as the base year so

inflation 2001 is =
`(CPI(2001)-100)/(100)` × 100

inflation 2001 is = 0 %

and

CPI for 2002 will be

CPI ( 2002) =
`(P(2002)*Q(2002))/(P(2001)*Q(2001))` × 100

CPI ( 2002) =
`(100*4)/(100*2)` × 100

CPI ( 2002) = 133.33

so here inflation for 2002 is

inflation for 2002 =
`(CPI(2002)-100)/(100)` × 100

inflation for 2002 =
`(133.33 -100)/(100)` × 100

inflation for 2002 = 33.33%