Question

This table indicates the historical level of the Consumer Price Index (CPI) for the United States for 2006, 2007, and 2008.

Complete the table by (1) selecting the inflation rates for 2007 and 2008, and (2) indicating for each year whether there has been inflation, deflation, or hyperinflation.

Year	CPI	Inflation Rate	Change in Price Level
2006	201.6	—	—
2007	207.3
2008	215.3

What rates of inflation for 2009 would be consistent with disinflation between 2008 and 2009? Check all that apply.

53.9%

3.9%

3.8%

13.9%

What rates of inflation for 2009 would be consistent with hyperinflation? Check all that apply.

-3.9%

15.0%

120.0%

Answer 1

Inflation rate can be calculated using the following formula

Inflation 2007 = (207.3-201.6)/201.6 = 2.83%

Inflation(2008) = (215.3-207.3)/207.3 = 3.86% = 3.9% (Approximately)

Year	CPI	Inflation	Price level
2006	201.6	-	-
2007	207.3	2.8%	Inflation
2008	215.3	3.9%	Inflation

What rates of inflation for 2009 would be consistent with disinflation between 2008 and 2009?

3.9%

What rates of inflation for 2009 would be consistent with hyperinflation?

120%