Formula Consumer Price Index:
CPI = (Price of the Market Basket in Year X) / (Price of the Market Basket in Base Year) x 100
1. Calculate CPI:
Year Prices CPI (Base year: 2012) CPI (Base year: 2013) CPI (Base year: 2014)
2012 $20 100
2013 $40 200
2014 $50 250
2. Formula Inflation Rate (Change in Price Level): %Δ PL = (CPI (new) - CPI (old)) / (CPI (old)) x 100
Calculate the rate of inflation between Year 1 and Year 2. The price index (CPI) in Year 1 was 124.0. It was 130.7 in Year 2.
If the consumer price index was 170 in one year and 180 in the next year, then the rate of inflation from one year to the next was approximately:
A) 5 percent.
B) 9 percent.
C) 3 percent.
D) 2 percent.