complete 16 of 37 110 120 130 140 Remaining: 02:19:59 Time This Test: 230 pts Th

Question

complete 16 of 37 110 120 130 140 Remaining: 02:19:59 Time This Test: 230 pts This Question: 6 pts CPI The table shows the CPI in Zimbabwe. Year Calculate Zimbabwe's inflation rates in 2001 and 2002. Did the price level rise or fall in 2002? Did the inflation rate increase or decrease in 2002? 100 2000 73 2001 404 2002 Answer to 1 decimal place. Zimbabwe's inflation rate in 2001 was 1.9 percent. Zimbabwe's inflation rate in 2002 was percent. Tn 2002, Zimbabwe's price level iv and its inflation rate

Explanation / Answer

Consumer price index (CPI) is 100 for base year. Inflation rate is the percentage change in the price level from one year to the next year. It is expressed in the form of CPI as:

[(CPI current - CPI previous)/CPI current]*100

Given that CPI in 2000 was 100. It is given that CPI in 2001 was 171 So this means inflation rate in 2001 was

[(173-100)/100]*100 = 73%.

Similarly, inflation rate in 2002 was

[(404 - 173)/173]*100 = 133.53%.

CPI shows an increase in the index value so, (as also seen from the inflation rates derived above) inflation/price level rose in 2002. The inflation rate also rose in 2002.

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