College

Assume that the base year is 2016 and use the data from the table below.

[tex]
\[
\begin{array}{cc}
\text{Year} & \text{Price Level Index} \\
2015 & 97.9 \\
2016 & 100 \\
2017 & 102.4 \\
2018 & 103.5 \\
\end{array}
\]
[/tex]

The inflation rate for 2016 is:

a) [tex]$2.15 \%$[/tex]
b) [tex]$1.83 \%$[/tex]
c) [tex]$3.67 \%$[/tex]
d) [tex]$2.48 \%$[/tex]

Answer :

To find the inflation rate for 2016, we use the formula for inflation rate based on the price level index:

[tex]\[ \text{Inflation Rate} = \left(\frac{\text{Price Level Index this year} - \text{Price Level Index last year}}{\text{Price Level Index last year}}\right) \times 100 \][/tex]

For 2016, the price level index is 100, and for 2015, it is 97.9. Let's plug these numbers into the formula:

1. Subtract the Price Level Index of 2015 from the Price Level Index of 2016:
[tex]\[
100 - 97.9 = 2.1
\][/tex]

2. Divide the result by the Price Level Index of 2015:
[tex]\[
\frac{2.1}{97.9}
\][/tex]

3. Multiply the result by 100 to get the percentage:
[tex]\[
\left(\frac{2.1}{97.9}\right) \times 100 \approx 2.15\%
\][/tex]

Therefore, the inflation rate for 2016 is approximately [tex]\(2.15\%\)[/tex].

So, the correct answer is (a) [tex]\(2.15\%\)[/tex].

Other Questions