Calculate the inflation rate from year 1 to year 2 using the Consumer Price Index.
[? ]%
Round to the nearest tenth of a percent.
Answer (2)
Calculate the Consumer Price Index (CPI) for Year XXX1: CP I XXX 1 = 3850 .
Calculate the Consumer Price Index (CPI) for Year XXX2: CP I XXX 2 = 4200 .
Calculate the inflation rate: I n f l a t i o n R a t e = 3850 4200 − 3850 × 100 = 9.0909... .
Round the inflation rate to the nearest tenth of a percent: 9.1 % .
Explanation
Understanding the Problem We are given the Consumer Price Index (CPI) for various categories in Year XXX1 and Year XXX2. Our goal is to calculate the inflation rate from Year XXX1 to Year XXX2. The inflation rate is a measure of the percentage change in a price index, which in this case is the CPI.
Calculating CPI for Year XXX1 First, we need to calculate the CPI for Year XXX1 by summing the values for each category: CP I XXX 1 = 1430 + 380 + 380 + 500 + 450 + 220 + 200 + 290 = 3850 So, the CPI for Year XXX1 is 3850.
Calculating CPI for Year XXX2 Next, we need to calculate the CPI for Year XXX2 by summing the values for each category: CP I XXX 2 = 1550 + 440 + 400 + 540 + 530 + 240 + 200 + 300 = 4200 So, the CPI for Year XXX2 is 4200.
Calculating the Inflation Rate Now, we can calculate the inflation rate using the formula: I n f l a t i o n R a t e = CP I XXX 1 CP I XXX 2 − CP I XXX 1 × 100 Substituting the values we calculated: I n f l a t i o n R a t e = 3850 4200 − 3850 × 100 = 3850 350 × 100 I n f l a t i o n R a t e = 0.090909... × 100 = 9.0909...
Rounding the Inflation Rate Finally, we need to round the calculated inflation rate to the nearest tenth of a percent. So, 9.0909... rounded to the nearest tenth of a percent is 9.1%.
Final Answer Therefore, the inflation rate from Year XXX1 to Year XXX2 is 9.1%.
Examples
Understanding inflation rates is crucial in personal finance and economics. For instance, if you're planning to invest money, knowing the inflation rate helps you determine the real return on your investment. If an investment yields a 5% return and the inflation rate is 2%, your real return is only 3%. Similarly, businesses use inflation rates to adjust prices and wages, ensuring they maintain profitability and fair compensation in a changing economic environment. This calculation provides a foundation for making informed financial decisions and understanding economic trends.
The inflation rate from Year 1 to Year 2, calculated using the CPI values of 3850 and 4200, is 9.1%. This is done by applying the inflation rate formula, substituting the CPI values, and rounding the result. Thus, the final inflation rate is 9.1%.
;
