The annual rate of inflation can be found by subtracting: A. the real income from the nominal income. B. last year's price index from this year's price index. C. this year's price index from last year's price index and dividing the difference by this year's price index. D. last year's price index from this year's price index and dividing the difference by last year's price index.

Question

Business

Layton Kidd

23 February, 16:40

The annual rate of inflation can be found by subtracting: A. the real income from the nominal income. B. last year's price index from this year's price index. C. this year's price index from last year's price index and dividing the difference by this year's price index. D. last year's price index from this year's price index and dividing the difference by last year's price index.

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Mary · Answer 1

D. last year's price index from this year's price index and dividing the difference by last year's price index.

Explanation:

Inflation is the sustained general increase in price levels in the economy per period. The inflation rate is a measure of the pace at which prices are increasing in a period. The CPI or consumer price index is the index used to communicate how prices have changed in a period.

The CPI calculation involves identifying a base year, or the reference year. If the base year CPI is not given, the preceding year id the reference year. The formula is as below,

=inflation rete is CPI new - CPI old x 100

CPI old

In other words, the CPI is calculated as follows new CPI - minus old CPI divided by oldCPI multiplied by 100.