Question

if the price level rose in three consecutive years from 100 to 120 to 140, then the annual inflation rate over those years would group of answer choices remain the same. increase. decrease. equal 20%. previousnext

Answer 1

The annual inflation rate over those years can be calculated using the formula:

Inflation rate = ((Price level in year 2 - Price level in year 1) / Price level in year 1) x 100%

Using the given information, we can calculate the inflation rate for each year:

Inflation rate from year 1 to year 2 = ((120 - 100) / 100) x 100% = 20%
Inflation rate from year 2 to year 3 = ((140 - 120) / 120) x 100% = 16.67%

The annual inflation rate over those three years would not remain the same, as it is increasing each year.

Therefore, the correct answer is that the annual inflation rate over those years would increase.