Two years ago Carol's living expenses were $ 1200 $ 1200 per month. This year the same items cost Carol $ 1400 $ 1400 per month. What was the annual inflation rate for the past two years?

Given:

2 years ago - consumer price index 1,200 per month

current year - consumer price index 1,400 per month

Inflation rate = [ (Consumer price index current - Consumer price index previous) / Consumer price index previous ] * 100%

Inflation rate = [ (1400 - 1200) / 1200] * 100% = (200 / 1200) * 100% = 16.67%

Since 2 years has passed, the 16.67% inflation rate is good for 2 years. We simply divide the inflation rate by 2 to get the annual inflation rate.

16.66% / 2 = 8.33%

The annual inflation rate for the past two years is 8.33%

Inflation = ((price index difference / price index in base year) x 100) / period

= ((200 / 1200) x 100) / 2

= 8.33%