The Department of Economic Health in the country of Cavia has calculated the price index for a basket of goods from 2014 to 2018. January 2014 is the standardized price index (at 100) for a basket of consumer goods. The price index increased in 2015 to 105.7, in 2016 to 108.6, in 2017 to 115.9, and in 2018 it increased to 120.4. What are the inflation rates in Cavia for 2015, 2016, 2017, and 2018?

Answer & Explanation:

There're 2 ways to indicate the inflation rate:

(1) Inflation rate from 2014:

2015 is 5.7%

2016 is 8.6%

2017 is 8.6%

2018 is 15.9%

(2) Inflation rate compare to previous year

= (price index this year - price index previous year) / price index previous year

2015 is 5.7% = (105.7-100) / 100

2016 is 2.74% = (108.6 - 105.7) / 105.7

2017 is 6.72% = (115.9 - 108.6) / 108.6

2018 is 3.88% = (120.4 - 115.9) / 115.9