Question

The index number representing the price level changes from 109 to 118 in one year. The inflation rate during the year is _____ percent. Round your answer to two digits to the right of the decimal

Answer 1

The price levels given are:

$Initial=109$$final=118$

The inflation rate can be calculated using the relationship

$\begin{gathered} \frac{\text{price level change}}{initial\text{ }price}\times100\text{ \%} \\ \\ =\frac{\text{final price-initial price}}{i\text{nitial price}}\times100\text{ \%} \end{gathered}$

Substituting the values into the formula we will have

$\frac{118-109}{109}\times100\text{ \%}$

Simplifying further, we will have

$8.26\text{ \%}$

Thus, we have the inflation rate to be:

8.26 percent