If the price index in period 2 is 109 and the price index in period 3 is 125, the rate of inflation between period 2 and period 3 isChoose one answer from the options below.16.0%14.7%9.0%8.7%
Question
If the price index in period 2 is 109 and the price index in period 3 is 125, the rate of inflation between period 2 and period 3 isChoose one answer from the options below.16.0%14.7%9.0%8.7%
Solution
The rate of inflation between period 2 and period 3 can be calculated using the formula:
Inflation Rate = [(Price Index in Period 3 - Price Index in Period 2) / Price Index in Period 2] * 100%
Substituting the given values:
Inflation Rate = [(125 - 109) / 109] * 100%
Inflation Rate = [16 / 109] * 100%
Inflation Rate = 0.14678899082568808 * 100%
Inflation Rate = 14.678899082568808%
So, the rate of inflation between period 2 and period 3 is approximately 14.7%. Therefore, the correct answer is 14.7%.
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