Consumer Price Index (a) The CPI was 229.39 for 2012 and...

Consumer Price Index
(a) The CPI was 229.39 for 2012 and 243.80 for 2017 . Assuming that annual inflation remained constant for this time period, determine the average annual inflation rate.
(b) Using the inflation rate from part (a), in what year will the CPI reach $300 ?$

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Key Concepts

Consumer Price Index (CPI)

The Consumer Price Index is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care, to gauge the overall price level and its changes over time. It is a critical indicator used to assess inflation and understand the cost of living in an economy.

Inflation Rate Calculation

The inflation rate represents the percentage increase in the general price level of goods and services from one period to another. It is calculated by comparing the CPI values over time, typically using the formula for average annual growth rate, which ensures that the rate reflects compounding over the period.

Exponential Growth in Price Levels

Exponential growth is the process by which a quantity increases over time at a rate proportional to its current value. In the context of CI and inflation, it is used to model how prices acumulatively increase over multiple periods when the inflation rate is constant, enabling the calculation of future price levels or targets.

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