Question

Below is a hypothetical CPI table. Year Hypothetical CPI Inflation rate 1935 10 — 1936 20...

Below is a hypothetical CPI table.

Year Hypothetical CPI Inflation rate
1935 10
1936 20 %
1937 40 %
1938 80 %

Find the three-year inflation rate from 1935 to 1938.

Homework Answers

Answer #1

If we change the base year, each year, to the previous year, then the three-year inflation rates from 1935 to 1938 are as under:

Year

Hypothetical CPI

Inflation rate

1935

10

1936

20

100%

1937

40

100%

1938

80

100%

However, if the base year is kept fixed as 1935, then the three-year inflation rates from 1935 to 1938 are as under:

Year

Hypothetical CPI

Inflation rate

1935

10

1936

20

100%

1937

40

300%

1938

80

700%

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