The inflation rate is calculated by comparing the percentage change in the CPI. If the base year is 1970 and the 2016 price index is 135 , purchases of $7 comma 000 of goods in the base year would cost $ nothing for the same goods in 2016. (Round your response to the nearest whole number. )

Solution:

Inflation is defined as the rate of price growth. The average percentage change is measured as a demand index change. We equate the percentage difference for the CPI to measure the average U. S. inflation rate. In 1970 with the price index for 2016 at 135, the current year will cost $6,500 of sales for the current year to $8,775 for 2016.

The dollar value of 2016 represents the stock index for the start fraction of 2016

Over Price index in 1970 left parenthesis base year right parenthesis End Fraction times Value in 1970 dollars Value in 2016 dollars=

Price index in 2016

Price index in 1970 (base year) * Value in 1970 dollars

Value in 2016 dollars equals Start Fraction 135 Over 100 End Fraction times $ 6,500 Value in 2016 dollars = 135

100*$6,500

Value in 2016 dollars=$8,775