Question

If the Consumer Price Index (CPI) for 1989 was 124, the rate of inflation between the base period and 1989 was _ _ _ __? 24 percent, 2.4 percent, 14 percent, 1.4 percent?

Answer 1

Answer:

The correct option is 1.

Step-by-step explanation:

Formula for Consumer Price Index (CPI):

$CPI=\frac{\text{Cost of market basket in current year}}{\text{Cost of market basket in base year}}\times 100$

It is given that Consumer Price Index (CPI) for 1989 was 124.

$\text{Rate of inflation}=\frac{CPI_x-CPI_0}{CPI_0}$

Where, $CPI_x$ is current consumer price index and $CPI_0$ is initial consumer price index.

The initial consumer price index is always 100.

$\frac{124-100}{100}=0.24=24\%$

Since If the rate of inflation between the base period and 1989 is 24%, therefore option 1 is correct.

Answer 2

If the CPI for 1989 was 124, the rate of the inflation between the base period and 1989 was 24%!