Calculate the inflation rate from year XXX1 to year XXX2 using the Consumer Price Index.
| | XXX1 | XXX2 |
| :-------------------- | :--- | :--- |
| Housing | 1450 | 1560 |
| Food | 400 | 440 |
| Transportation | 450 | 510 |
| Medical | 520 | 560 |
| Education | 470 | 530 |
| Apparel | 320 | 360 |
| Recreation | 200 | 210 |
| Other | 270 | 290 |
Answer (2)
Calculate the CPI for year XXX1: CP I XXX 1 = 4080 .
Calculate the CPI for year XXX2: CP I XXX 2 = 4460 .
Calculate the inflation rate: 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 .
The inflation rate from year XXX1 to year XXX2 is 9.31% .
Explanation
Calculate CPI for Year XXX1 First, we need to calculate the Consumer Price Index (CPI) for year XXX1 by summing the CPI values for all categories in that year.
Sum CPI Values for Year XXX1 The CPI for year XXX1 is calculated as follows: CP I XXX 1 = 1450 + 400 + 450 + 520 + 470 + 320 + 200 + 270 = 4080 So, the CPI for year XXX1 is 4080.
Calculate CPI for Year XXX2 Next, we calculate the CPI for year XXX2 by summing the CPI values for all categories in year XXX2.
Sum CPI Values for Year XXX2 The CPI for year XXX2 is calculated as follows: CP I XXX 2 = 1560 + 440 + 510 + 560 + 530 + 360 + 210 + 290 = 4460 So, the CPI for year XXX2 is 4460.
Calculate Inflation Rate Now, we 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
Substitute Values and Calculate Substituting the values we calculated: I n f l a t i o n R a t e = 4080 4460 − 4080 × 100 = 4080 380 × 100 I n f l a t i o n R a t e = 0.0931372549 × 100 = 9.31372549 Rounding to two decimal places, the inflation rate is approximately 9.31%.
Final Answer Therefore, the inflation rate from year XXX1 to year XXX2 is approximately 9.31%.
Examples
Understanding inflation rates is crucial for making informed financial decisions. For example, if you're planning to invest money, knowing the inflation rate helps you determine the real return on your investment. If the inflation rate is 3% and your investment yields 5%, your real return is only 2%. Similarly, businesses use inflation rates to adjust prices and wages, ensuring they maintain profitability and fair compensation for employees. This calculation provides a foundation for understanding economic trends and making sound financial strategies.
To find the inflation rate from year XXX1 to XXX2, calculate the CPI for both years, which are 4080 and 4460, respectively. Then use the inflation rate formula to find that it is approximately 9.31%. This reflects the percentage increase in prices over the specified period.
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