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Chapter 22: Q. 3 (page 552)

Compute the inflation rate for fruit prices from 2001 to 2004.

Short Answer

Expert verified

28.96%,11.23%,and 6%are the inflation rate for fruit prices from 2001 to 2004.

Step by step solution

01

Step 1. Inflation Rate.

The inflation rate is an increase in the price of goods and services over time that decreases the purchasing power of money.

02

Step 2. Calculation.

The formula used for computing the inflation rate is the percentage change in the price index from year to year.

The inflation rate for fruit prices from 2001to 2002,

= (89.90 - 69.71)/69.71

=20.19/69.71

=0.2896

=28.96%

The inflation rate for fruit prices from 2002to 2003,

=(100-89.90)/89.90

=10.1/89.90

=0.1123

=11.23%

The inflation rate for fruit prices from 2003to 2004.

=(100-106)/100

=-6/100

=0.06

=6%

28.96%,11.23%,and 6% are the inflation rate for fruit prices from 2001to 2004.

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Most popular questions from this chapter

If inflation rises unexpectedly by 5%, indicate for each of the following whether the economic actor is helped, hurt, or unaffected:

a. A union member with a COLA wage contract

b. Someone with a large stash of cash in a safe deposit box

c. A bank lending money at a fixed rate of interest

d. A person who is not due to receive a pay raise for another 11 months

Why does 鈥渟ubstitution bias鈥� arise if we calculate the inflation rate based on a fixed basket of goods?

What is deflation?

How should an increase in inflation affect the interest rate on an adjustable-rate mortgage?

If a government gains from unexpected inflation when it borrows, why would it choose to offer indexed bonds?
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