Question

In the year 2000, the economy produces 50 loaves of bread that sell for $1 each. In the year 2001, the economy produces 100 loaves of bread that sell for $3 each. In the year 2002, the economy produces 200 loaves of bread that sell for $4 each. What is the inflation rate for 2001 & 2002 (Use 2001 as the base year)?

Answer 1

Answer:

inflation 2001 is  = 0 %

inflation for 2002 = 33.33%

Explanation:

given data

economy produces = 50 loaves

sell = $1 each

produces =  100 loaves

sell =  $3 each

produces =  200 loaves

sell = $4 each

solution

we get here inflation rate for 2001 & 2002 with Using 2001 as the base year so

inflation 2001 is = $\frac{CPI(2001)-100}{100}$ × 100

inflation 2001 is  = 0 %

and

CPI for 2002 will be

CPI ( 2002) = $\frac{P(2002)*Q(2002)}{P(2001)*Q(2001)}$ × 100

CPI ( 2002) = $\frac{100*4}{100*2}$ × 100

CPI ( 2002) = 133.33

so here inflation for 2002 is

inflation for 2002 = $\frac{CPI(2002)-100}{100}$ × 100

inflation for 2002 = $\frac{133.33 -100}{100}$ × 100  

inflation for 2002 = 33.33%