MACROECONOMICS FOR TODAY-W/LMS MINDTAP
MACROECONOMICS FOR TODAY-W/LMS MINDTAP
9th Edition
ISBN: 9781305927117
Author: Tucker
Publisher: CENGAGE L
Question
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Chapter 7, Problem 2SQ
To determine

The rate of inflation.

Expert Solution & Answer
Check Mark

Answer to Problem 2SQ

Option 'd’ is correct.

Explanation of Solution

Option (d):

The rate of inflation is calculated as follows:

Inflation Rate =CPIyCPIxCPIx×1008=325300300×1008=25300×10088.33

The calculated value of the rate of inflation is approximately equal to the given value. Thus, option 'd' is correct.

Option (a):

Inflation Rate =CPIyCPIxCPIx×100325=325300300×100325=25300×100325>8

The calculated value of the rate of inflation is less than the given value of 325 percent. Thus, option 'a' is incorrect.

Option (b):

Inflation Rate =CPIyCPIxCPIx×10025=325300300×10025=25300×10025>8

The calculated value of the rate of inflation is less than the given value of 25 percent. Thus, option ‘b’ is incorrect.

Option (c):

Inflation Rate =CPIyCPIxCPIx×1005=325300300×1005=25300×1005<8

The calculated value of the rate of inflation is greater than the given value of 5 percent. Thus, option ‘c’ is incorrect.

Economics Concept Introduction

Inflation: Inflation refers to a continuous increase in the average price level in an economy.

Consumer price index: Consumer price index refers to the changes in the price level of consumer goods and services purchased by households.

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