Question

Suppose that your salary in 2010 was $40,000 and $43,000 in 2018. If the CPI index was 218.1 in 2010 and 250.5 in 2018, what is the cumulative inflation rate from 2010 in 2018?

	a.	none of the answers are correct.
	b.	10%
	c.	-6.4%
	d.	-2.3%
	e.	14.9%

Answer 1

Consumer Price Index(CPI) is a measure of weighted average prices of a pre determined basket of consumer goods and services.

Inflation means a persistent increase in the prices of goods and services over a period of time.

CPI can be used to analyse the standard of living of the consumers.

Here, given that

Current CPI(2018) =250.5

previous CPI(2010) =218.1

In order to calculate cumulative inflation rate we need to use following formulae i.e

Inflation=Current CPI -Previous CPI/PreviousCPI *100

Inflation = 250.5 - 218.1/218.1 * 100

= 32.4 /218.1 *100

= 0.149 ×100

= 14.9

So the answer for this question is 'e' i.e 14.9