If a bundle of goods used to calculate the consumer price index rises from $80 to $86 over a one-year period, what is the inflation rate for that year?

Question

Business

Bryan Duran

9 June, 05:21

If a bundle of goods used to calculate the consumer price index rises from $80 to $86 over a one-year period, what is the inflation rate for that year?

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Answers (1)

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Vegas · Answer 1

Inflation rate = 7.5%

Explanation:

A measure that examines the weighted average of prices of a basket of consumer goods and services, such as food is referred to as the Consumer Price Index (CPI).

It is calculated by taking price changes for each item in the proposed basket of goods and averaging them.

Inflation rate = [CPI in X years - CPI in (X-1) year / CPI in (X-1) year * 100].

= (86-80) / (80*100)

= 6/800

= 0.0075

Inflation rate = 7.5%