Assume the rate of inflation is 5% per year for the next 2 years. What will be the cost of goods 2 years from now, adjusted fo
r inflation, if the goods cost $280.00 today?
@Jimthompson5910
1 answer:
The equation for inflation is
A = P*(1+r)^t
which is an exponential growth equation (if r > 0). If r < 0, then we have deflation.
where...
A = final price after t years
P = initial starting price
r = rate of inflation in decimal form
t = number of years
In this case,
A = unknown (we're solving for this)
P = 280 is the starting price
r = 0.05 is the decimal form of 5%
t = 2 years
We will plug these three pieces of info into the formula to get...
A = P*(1+r)^t
A = 280*(1+0.05)^2
A = 280*(1.05)^2
A = 280*(1.1025)
A = 308.70
Answer: 308.70 dollars
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