Question

Using the data in the table below, calculate the CPI and the inflation rate in each year, using 2010 as a base year. Instructions: Round your answers to one decimal place. Year Cost of basket () 2010 2011 2012 2013 2014 2015 CPI Inflation rate 20,000 21,600 22,800 26,150 28,845 32,500

Answer 1

Year	Cost of Basket	CPI	Inflation Rate
2010	20,000	100.0	-
2011	21,600	108.0	8.0%
2012	22,800	114.0	5.6%
2013	26,150	130.8	14.7%
2014	28,845	144.2	10.3%
2015	32,500	162.5	12.7%

Explanation for the above answers:

Since year 2010 is the base year for computing the inflation, so CPI for that year is given as 100.

Now CPI for year 2011 = (Cost of Basket for year 2011/Cost of basket for the base year 2010) * 100 (Base Year CPI)

Similarly , CPI for the year 2012 = (Cost of Basket for year 2012/Cost of basket for the base year 2010) * 100 (Base Year CPI) and so on...

Inflation: Now, since inflation rate is the increase in the CPI vis-a-vis the previous year. Here the base year is still 2010.

So inflation for any year 't' = ((CPI for year 't' / CPI for year "t-1") - 1 ) * 100.

That's how you can calculate them.