Question

Note that the CPI-based rate of inflation between 2015 and 2016 in the baseline scenario provided is 9.6%. Suppose, instead of rising from $2 to $2.50 between 2015 and 2016, the price of hamburgers rose to $3.50. What would be the rate of inflation? Instructions: Round your answer to one decimal place.

Answer 1

Inflation rate = 75%

Step-by-step explanation:

Inflation is the increase in the general price level. Inflation erodes the purchasing power of money. Inflation is measured by the changes in the consumer price index.

Here, we can compute the rate of inflation as the rate of change in the prices of the same item over the course of a period.

Inflation rate= (current price - initial price)/initial price × 100

= ( 3.50-2.00)/2 × 100

= 75%

Inflation rate= 75%