Question

Suppose the CPI has a value of 225.3 exactly one year ago, and the current value of this index is 231.16, a rise of 5.86 points. What was the rate of inflation over the past year?

Answer 1

2.6%

Explanation:

Given the current CPI = 231.56

Previous CPI (CPI a year ago) = 225.3

Rate of inflation over the past year = current CPI - previous CPI/previous CPI × 100%

Rate of inflation = 231.56-225.3/225.3 × 100%

5.86/225.3× 100%

= 2.6%

Rate of inflation over the past year will be 2.6%