Question

The Bureau of Labor Statistics has a website (www.bls.gov) that contains a Consumer Price Index inflation calculator that uses the average CPI to adjust the purchasing power of money over different periods of time. The CPI index value has been calculated every year since 1913. The calculator indicated that $2.1 million in 1913 would have the same purchasing power as $23, 930, 909 in 2016.

What was the average inflation rate over this 103-year time period?

The average inflation rate was ____% per year.

Answer 1

10.40 or 1040% for 103years, 0.10 or 10% average inflation rate per year within the 103 years period

Step-by-step explanation:

To calculate the inflation rate for the period using the cpi, subtract the base cpi from the current cpi and divide by the base cpi, that is,

(current cpi - base cpi)/base cpi

inflation rate for 103 years = (23,930,909 - 2,100,000)/2,100,000

= 10.40 or 1040%

The average inflation rate per year = 1040%/103

= 10.09%, approx. 10%