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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

Why does “substitution bias” arise if we calculate

the inflation rate based on a fixed basket of goods?

Within 1or 2percentage points, what has the U.S. inflation rate been during the last 20years? Draw a graph to show the data.

What has been a typical range of inflation in the

U.S. economy in the last decade or so?

If, over time, wages and salaries on the average rise at least as fast as inflation, why do people worry about how inflation affects incomes?

How do economists use a basket of goods and

services to measure the price level?
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