Chapter 23, Problem 1SPPA

To determine

To calculate:

The CPI in Canada in 2015.

Explanation of Solution

The CPI in 2014 is 25.2% which is CPI1, and the inflation rate in 2015 is 1.1%. Therefore, with the execution of these figures in the following equation, CPI for 2015 can be found (CPI2).

  $I=\frac{CPI1-CPI2}{CPI1}\times 100$

Substituting the values,

  $\begin{array}{l}1.1\%=\frac{x-25.2\%}{25.2\%}\times 100\\ 1.1\%\times 25.2\%=\left(x-25.2\%\right)\times 100\\ 27.72=100x-2520\\ 27.72+2520=100x\end{array}$

  $\begin{array}{l}\frac{2547.72}{100}=\frac{100x}{100}\\ 25.48\%=x\end{array}$

Therefore, the CPI in 2015 is 25.8%.

Economics Concept Introduction

Consumer price index:

Consumer price index is a measure to check the changes in the price levels, where prices of the basket of goods and services are measured against the base year.