Question

QUESTION 12 . 1 POINT The table below shows the index numbers for the cost of a basket of goods and services in each period. Use this information to calculate the inflation rate for each period. Round to two decimal places. Inflation Rate Index Number 105 108 Period 1 Period 2 Period 3 Period 4 Provide your answer below: Period 2 = %; Period 3 = %; Period 4 =

Answer 1

Let the inflation rate is r.

Index number = IN

Number of year = n

Period 2:

IN of 2 = IN of 1 × (1 + r) ^ n

108 = 105 × (1 + r) ^ 1

108/105 = 1 + r

1.02857 – 1 = r

0.02857 = r

Now this is to be multiplied by 100 to get the answer; (0.02857 × 100 =) 2.86%.

Answer: 2.86%

Period 3:

IN of 3 = IN of 2 × (1 + r) ^ n

111 = 108 × (1 + r) ^ 1

111/108 = 1 + r

1.02777 – 1 = r

0.02777 = r

Now this is to be multiplied by 100 to get the answer; (0.02777 × 100 =) 2.78%.

Answer: 2.78%

Period 4:

IN of 4 = IN of 3 × (1 + r) ^ n

116 = 111 × (1 + r) ^ 1

116/111 = 1 + r

1.04504 – 1 = r

0.04504 = r

Now this is to be multiplied by 100 to get the answer; (0.04504 × 100 =) 4.50%.

Answer: 4.50%