Question

the price index was 170 in the first year, 180 in the second year, and 195 in the third year. the inflation rate was about a. 5.9 percent between the first and second years, and 8.3 percent between the second and third years. b. 5.6 percent between the first and second years, and 7.7 percent between the second and third years. c. 80 percent between the first and second years, and 95 percent between the second and third years. d. 10 percent between the first and second years, and 15 percent between the second and third years.

Answer 1

The inflation rate was 5.9 percent between the first and second years, and 8.3 percent between the second and third years. Hence, A is the correct option.

When we compare the values for any two periods or locations it reveals the average change in prices between the two periods or the average difference in prices between locations, the price index is a measure of relative price changes.

Take the Market Basket's price for the interest-bearing year, divide it by the Market Basket's price for the base year, then multiply the result by 100 to get the Price Index.

Price indices typically pick a base year and set that year's index value to 100. As a proportion of that base year, every other year is expressed. Let 2000 serve as the basis year in this illustration: In 2000, the index's initial value was $2.50; since $2.50/$2.50 = 100%, the index's current value is 100.

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