In 2012, Quarterville’s CPI was 110. In 2013, the CPI increased to 112. Calculate the percentage change in the CPI between 2012 and 2013. Was this inflation or deflation?
In 2012, Quarterville’s CPI was 110. In 2013, the CPI increased to 112. Calculate the percentage change in the CPI between 2012 and 2013. Was this inflation or deflation?
Chapter13: Inflation
Section: Chapter Questions
Problem 4SQP
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Question
In 2012, Quarterville’s CPI was 110. In 2013, the CPI increased to 112. Calculate the percentage change in the CPI between 2012 and 2013.
Was this inflation or deflation?
Expert Solution
Step 1
Percentage change in CPI is the rate of inflation or deflation in the country. As the CPI in 2012 was 110 and in 2013, it increased to 112, the economy is facing inflation.
It can be calculated as:
CPI1 is the consumer price index in year 1. In the question, it is year 2013.
CPI0 is the consumer price index in year 0. In the question, it is year 2012.
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