Question #224651

Suppose a country's CPI increased from 2.1 to 2.3 in the course of 1 year. Use this fact to compute the rate of inflation for that year. Why might the CPI overstate the rate of inflation?


Expert's answer

ANSWER


The percentage change in the CPI is given by;


CPI = CHANGE IN THE CPI \ INITIAL CPI * 100%

= (2.3 - 2.1) \ (2.1)* 100%

= 9.52%



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Canada #340153 on Dec 2023