Question

2. Calculatingand categorizing inflation This table indicates the historical level of the Consumer Price Index (CPI) for the United States for 1921, 1922, and 1923. Complete the table by (1) selecting the inflation rates for 1922 and 1923, and (2) indicating for each year whether there has been inflation, deflation, or hyperinflation. Year CPI Inflation Rate Change in Price Level 1921 17.9 1922 16.8 -1.1% Deflation 1923 17.1 0.3% Inflation What rates of inflation for 1924 would be consistent with disinflation between 1923 and 1924? Check all that apply. 1.7% 1.8% 11.8% 1.6%

Answer 1

Inflation Rate Change in Price Level Year 1921 1922 1923 CPI 17.9 16.8 17.1 -6.1% Deflation 1.8% Inflation What rates of inflation for 1924 would be consistent with disinflation between 1923 and 1924? Check all that apply. 1.7% 0 1.8% 11.8%

inflation rate between 1921 and 1922 = (16.8 - 17.9)/17.9 = -6.1%

inflation rate between 1922 and 1923 = (17.1 - 16.8)/16.8 =  1.8%

Hence, inflation rate in 1924, to be less than 1.8% and greater than 0%. will create disinflation between 1923 and 1924.

What rates of inflation for 1924 would be consistent with hyperinflation? Check all that apply. 15.0% 120.0% -1.8% 100.0%