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The US CPI in September 2018 was 252.4; in September 2017 the CPI was 246.8: What...

The US CPI in September 2018 was 252.4; in September 2017 the CPI was 246.8: What was the annual rate of inflation measured from September 2017-2018 At this rate of inflation, approximately how long will it take for the price level to double? ( rule of 70: 70/inflation rate: tells how many years it will take to double) Suppose Janice's nominal income rose by 4% from December 2008 to December 2009 while Jeff's increased by only 2%. By what percentage did each of their real incomes change?

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Answer #1

Inflation rate between 2017-2018 = (252.4-246.8)/246.8

Inflation rate between 2017-2018 = 2.27%

As per the rule of 70:

No. of years to double the price level = 70/inflation rate = 70/2.27

No. of years to double the price level = 30.84 years

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Actual inflation rate in USA in 2009 = -.4%

So, % rate by Janice real income changed = 4% - (-.4%) = 4.4%

% rate by Jeff's real income changed = 2% - (-.4%) = 2.4%

Alternatively on the basis of given inflation rate in question:

% rate by Janice real income changed = 4% - 2.27% = 1.79%

% rate by Jeff's real income changed = 2% - 2.27% = -.27%

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