Question

For an imaginary economy, the value of the consumer price index was 140 in 2013, and the inflation rate was 5.0 percent between 2013 and 2014. The consumer price index in 2014 was?

Answer 1

147

Explanation:

Value of consumer price index (2013) = 140

Inflation rate = 5%

Value of consumer price index (2014) =?

To find the value of consumer price index in 2014 we have to use inflation rate with the consumer price value of 2013.

Inflation =Increase in value = Value of consumer price index in 2013 x Inflation rate

Inflation = Increase in value = 140 x 5% = 7

Value of consumer price index (2014) = Consumer price index value in 2013 + Inflation

Value of consumer price index (2014) = 140 + 7

Value of consumer price index (2014) = 147