Answer:
CPI for 2007 where base year is 2006 is 100%
CPI for 2008 where base year is 2007 is 25%
CPI for 2009 where base year is 2008 is -20%
CPI for 2010 where base year is 2009 is 212.5%
CPI for 2011 where base year is 2010 is 60%
Explanation:
The CPI (consumer price index) for different years is calculated by this formula:
CPI= (Current price in X year/base price in X year)
CPI for 2007 if 2006 is the base year. = $40/$20
=2x100 then we multiply by 100 to get the percentage as the baseline for the CPI .
=200% - 100%= 100% we then subtract 100% to get how much change over time has happened and in this case CPI is 100% that meanse there was a 100%inflation rate in prices.
CPI for 2008 if 2007 is the base year = $50/$40 we substitute the prices respective to the base year 2007 using the above mentioned formula to calculate CPI.
= 1.25 x 100 then we multiply by 100 to get the percentage as the baseline for the CPI for year 2008.
=125% -100% = 25% this means that CPI is 25% which there was an inflation rate of 25% between year 2007 and 2008.
CPI for 2009 if 2008 was the base year= $40/$50 we again substitute the prices using the above mentioned formula to calculate CPI where 2008 is now the base year.
=0.8x100 to get the percentage we multiply by 100%
= 80% - 100%= -20% this means that CPI has decreased by 25% between 2008 and 2009 there was deflation in prices.
CPI for 2010 if 2009 is the base year = $125/$40 we substitute to the above formula where 2009 is the base year.
=3.125x 100 we then multiply by 100 to get the percentage of CPI.
=312.5%- 100%=212.5% which means there was inflation of 212.5% in prices on the CPI.
CPI for 2011 if 2010 is the base year = $200/$125
=1.6x 100
=160%-100%
CPI= 60%
This means in the economy there was an inflation of 60%.
