Question

In Country A, consumers spent $290$⁢290 a month on a basket of goods in 2007 and $320$⁢320 in 2008. In Country B, the price of the same basket of goods was $25$⁢25 higher than in Country A in 2007 and $30$⁢30 higher in 2008.

Calculate the percentage difference between Country A's and Country B's inflation rates from 2007 to 2008. Throughout your calculations, round to one decimal place if necessary. Enter your answer as a positive number in the box below.

Answer 1

country	2007 PRICE	2008 PRICE
A	$290	$320
B	$315	$350

base year 2007

country A

CPI year 2007=2007 price /base year price *100

cpi 2007 =(290/290)*100=100

CPI year 2008=(price 2008/base year )*100

cpi 2008= (320/290)*100=110.3

inflation ={(cpi 2008-cpi 2007)/cpi 2007}*100={(110.3-100)/100}*100

inflation in 2008 in country A from 2007=10.3%

country B

cpi 2007 =(315/315)*100=100

cpi 2008=(350/315)*100=111.1

inflation ={(111.1-100)/100}*100

inflation in2008 =11.1%

percentage change in inflation of country A and B=11.1%-10.3%=0.8%