Question

In the fictional country of Dirian the economics statistics department has been busy calculating the price index for a basket of goods from 2013 to 2017. January 2013 is the standardized price index, at 100, for a basket of consumer goods in the country. The price index increased in 2014 to 104.7, in 2015 to 109.3, in 2016 to 113.1, and in 2017 it increased to 119.2. You have been called to the country to help establish the rate of inflation for those years. What are the inflation rates in Dirian for 2014, 2015, 2016, and 2017

Answer 1

Inflation refers to the general rise in price levels of goods and services in an economy.

`Inflation = (CPI in current year - CPI in previous year)/(CPI in current year) *100`

2014 Inflation;

`Inflation = (104.7 - 100)/(100) *100\\= 0.047`

= 4.7%

2015

`Inflation = (109.3 - 104.7)/(104.7) *100\\\\= 0.0439`

= 4.39%

2016

`Inflation = (113.1 - 109.3)/(109.3) *100\\\\= 0.0348`

= 3.48%

2017

`Inflation = (119.2 - 113.1)/(113.1) *100\\\\= 0.0539`

= 5.39%