Answer:
<u>The correct answer is 2. 2. In year 1, the price of a candy bar is $0.50. In year 2, the same candy bar is $0.51. </u>
<u>Price of candy bar in Yr 2 should be = 0.50 * 1.02 = 0.51</u>
<u>This scenario reflects an inflation of 2%. </u>
Step-by-step explanation:
Let's check each scenario and select the one that reflects an annual inflation rate of 2%.
1. In year 1, the price of a tire is $100. In year 2, the same tire costs $120.
Price of tire in Yr 2 should be= 100 * 1.02 = 102
This scenario reflects an inflation of 20%. Not the one we're looking for.
2. In year 1, the price of a candy bar is $0.50. In year 2, the same candy bar is $0.51.
Price of candy bar in Yr 2 should be = 0.50 * 1.02 = 0.51
<u>This scenario reflects an inflation of 2%. This is the correct answer.</u>
3. In year 1, the price of a pair of shoes is $30. In year 2, the same pair of shoes is $32
Price of pair of shoes in Yr 2 should be= 30 * 1.02 = 30.60
This scenario reflects an inflation of 6.7%. Not the one we're looking for.
4. In year 1, the price of a pair of headphones is $20. In year 2, the same pair of headphones is $21.
Price of pair headphones in Yr 2 should be= 20 * 1.02 = 20.40
This scenario reflects an inflation of 5%. Not the one we're looking for.
