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Problems 69-72 require the following discussion. The consumer price index (CPI) indicates the relative change in price over time for a fixed basket of goods and services. It is a cost of living index that helps measure the effect of inflation on the cost of goods and services. The CPI uses the base period 1982-1984 for comparison (the CPI for this period is 100). The CPI for March 2015 was . This means that in the period 1982-1984 had the same purchasing power as in March 2015. In general, if the rate of inflation averages percent per annum over years, then the CPI index after years is where is the CPI index at the beginning of the period.
Source: U.S. Bureau of Labor Statistics
Consumer Price Index If the average annual inflation rate is , how long will it take for the CPI index to double? (A doubling of the CPI index means purchasing power is cut in half.)
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