Question

Numerical Problem #7 (Chapter 2) For the consumer price index values shown, calculate the rate of inflation in each year from 1930 to 1933. 1929 51.3 1930 50.0 1931 45.6 1932 40.9 1933 38.8 Year CPI

Answer 1

Inflation Rate = % change in CPI

Inflation between 1930 and 1931

=( CPI₁₉₃₁  - CPI₁₉₃₀ / CPI₁₉₃₀ ) * 100

= (45.6- 50 / 50 ) * 100

= - 8.8%

Inflation between 1931 and 1932

( CPI₁₉₃₂  - CPI₁₉₃₁ / CPI₁₉₃₁ ) * 100

=(40.9-45.6)/ 45.6 ) *100

= -10.31%

Inflation between 1932 and 1933

( CPI₁₉₃₃  - CPI₁₉₃₂/ CPI₁₉₃₂) * 100

=[(38.8-40.9)/ 40.9 ] *100

= -5.13%