Calculate the index number of rice and cotton by assuming 2005-2006 as the base year
Answers
Calculate the index number of rice and cotton by assuming 2005-2006 as the base year is given below
Explanation:
1.So if we want to know how much prices have increased over the last 12 months (the commonly published inflation rate number) we would subtract last year's Consumer Price Index from the current index and divide by last year's number and multiply the result by 100 and add a % sign.
2.Inflation is calculated by taking the price index from the year in interest and subtracting the base year from it, then dividing by the base year. This is then multiplied by 100 to give the percent change in inflation. Thus from 2006 to 2007, inflation has risen 20%.
3.The base period or base year refers to the year in which an index number series begins to be calculated. This will invariably have a starting value of 100. For example, in constructing the Consumer price index, the government may use a base year of 2000. Therefore a CPI index may look like this.
4.Subtract the current year's CPI from the base year's CPI. In the example, 214.537 minus 172.2 equals 42.337. Divide the number calculated in Step 4 by the base year's CPI. This is the inflation rate.
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