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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

The Consumer Price Index is subject to the substitution bias and the quality/new goods bias. Are the Producer Price Index and the GDP Deflator also subject to these biases? Why or why not?

Table 9.4 shows the fruit prices that the typical college student purchased from 2001 to 2004. What is the amount spent each year on the “basket” of fruit with the quantities shown in column 2?

Inflation rates, like most statistics, are imperfect measures. Can you identify some ways that the inflation rate for fruit does not perfectly capture the rising price of fruit?

What is deflation?

If inflation rises unexpectedly by 5%, would a state government that had recently borrowed money to pay for a new highway benefit or lose?
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