Question

55 if the consumer price index increased from 124.0 in year 2009 to 130.7 in year 2010,
the economy experienced
(A) Inflation of 5.4%
(B) Deflation of 6.7%
(C) Inflation of 6.7%
(D) Deflation of 5.4%
​

Answer 1

Answer:

$(B) Deflation \: of \: 6.7%$

Answer 2

The correct option is (A) Inflation of 5.4%

Given:

Consumer price index in 2009, C1 = 124

Consumer price index in 2010, C2 = 130.7

To Find:

Amount of Inflation/Deflation that the economy faced

Solution:

Since

The consumer price index refers to an index of the variation in prices for retail goods and other items.

So, if CPI increases inflation would occur.

Now, let's evaluate the inflation %

Inflation% =

$\frac{C_{2} -C_{1} }{C_{1} } \times 100$

$\frac{130.7-124}{124} \times 100 = 5.4%$%

Hence, the economy would experience inflation of 5.4%

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