Answer to Question #182184 in Macroeconomics for Md.Mahfuzur Rahman

Question

Suppose last year's consumer price index was 1.20. If the inflation rate is 4%, then find out the consumer price index of the current year. 

Answer 1

we will find it by the formula:

$inflation rate=\frac{consumer price index of the current year- last year's consumer price index}{ last year's consumer price index}$

$4=\frac{consumer price index of the current year- 1.2}{1.2}$

consumer price index of the current year=6%