An analyst gathered the following year-end price level data for an economy: What

Question

An analyst gathered the following year-end price level data for an economy:

What is the economy’s annual inflation rate for 2012? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

What is the average compounded inflation rate for 2007–2012? (Do not round intermediate calculations. Enter your answer as a percent rounded to 2 decimal places. Omit the "%" sign in your response.)

Explanation / Answer

The term price-level refers to the prices that must be paid in order to acquire a basket of good and services. The phenomenon of inflation refers to a continual rise of the price-level. The inflation rate is calculated by comparing the price level in one time period to the price level of a previous period Inflation Rate = ((P1 - P0) / P0) X 100 Year Price 2007 192 2011 208.3 2012 214.8 A.Inflation at 2012 taking 2011 as base year 3.120499 B.Average compounded inflation rate for 2007-2012 (Price level of 2012/Price level of 2007)^(1/end year - beginning year ) -1 2.270%

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