Selected Price Indices Based on the data from the four indices in the table, whi

Question

Selected Price Indices

Based on the data from the four indices in the table, which price index suggests the highest rate of inflation between the years 2000 and 2004, and between 1998 and 1999. What were the corresponding rates suggested by these indices?

a. The PPI indicates the highest inflation rate at 4.07% for 2000-2004; the CPI indicates the highest inflation rate of 2.1% for 1998-1999.

b. The PPI indicates the highest inflation rate at 10.5% for 2000-2004; the CPI indicates the highest inflation rate of 2.19% for 1998-1999.

c. The PPI indicates the highest inflation rate at 9.69% for 2000-2004; the CPI indicates the highest inflation rate of 1.45% for 1998-1999.

d. The PPI indicates the highest inflation rate at 8.25% for 2000-2004; the CPI indicates the highest inflation rate of 1.45% for 1998-1999.

Year CPI PPI PCE GDP Deflator 1995 88.49 94 91.58 92.11 1996 91.09 96.2 93.55 93.85 1997 93.22 96.14 95.12 95.41 1998 94.66 93.75 95.98 96.47 1999 96.73 94.54 97.58 97.87 2000 100.00 100.00 100.00 100.00 2001 102.83 101.11 102.09 102.4 2002 104.46 98.79 103.54 104.09 2003 106.83 104.07 105.52 106 2004 109.69 110.5 108.25 108.24

Explanation / Answer

b. The PPI indicates the highest inflation rate at 10.5% for 2000-2004; the CPI indicates the highest inflation rate of 2.19% for 1998-1999.

Inflation Rate btw 2000 & 2004 = [(110.5-100)/100 ]* 100 = 10.5% (From PPI)

Inflation Rate btw 1998 & 1999 = [(96.73-94.66)/94.66 ]* 100 = 2.19% (From CPI)

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