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Chapter 9: Q.3 (page 242)

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

Short Answer

Expert verified

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

Step by step solution

01

Step 1. Meaning

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 2001 to 2002,

= (89.90 - 69.71)/69.71

=20.19/69.71

=0.2896

=28.96%

The inflation rate for fruit prices from 2002 to 2003,

=(100-89.90)/89.90

=10.1/89.90

=0.1123

=11.23%

The inflation rate for fruit prices from 2003 to 2004.

=(100-106)/100

=-6/100

=0.06

=6%

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

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Most popular questions from this chapter

What is the difference between the price level and

the rate of inflation?

Imagine that the government statisticians who calculate the inflation rate have been updating the basic basket of goods once every 10 years, but now they decide to update it every five years. How will this change affect the amount of substitution bias and quality/new goods bias?

Why does the 鈥渜uality/new goods bias鈥� arise if we

calculate the inflation rate based on a fixed basket of goods?

Why does 鈥渟ubstitution bias鈥� arise if we calculate

the inflation rate based on a fixed basket of goods?

Describe a situation, either a government policy situation, an economic problem, or a private sector situation, where using the GDP deflator to convert from nominal to real would be more appropriate than using the CPI.
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