Calculating Inflation Rate for Airfare from 2263 to 2264
Question 1
As reported by the Bureau of Labor Statistics, the CPI for Airfare in 2263 was 574.4 (using a base year of 1914-100). The CPI for Airfare in 2264 was 616.6. Based on this data, what was the inflation rate of airfare from 2263 to 2264?
Answer:
To calculate the inflation rate of airfare from 2263 to 2264, we can use the formula:
Inflation rate = ((CPI in year 2 - CPI in year 1) / CPI in year 1) x 100
Using the data given, we have:
Inflation rate = ((616.6 - 574.4) / 574.4) x 100
Inflation rate = (42.2 / 574.4) x 100
Inflation rate = 0.0734 x 100
Inflation rate = 7.34%
Therefore, the inflation rate of airfare from 2263 to 2264 was 7.34%, which we can enter in decimal format as 0.0734.
To calculate the inflation rate of airfare from 2263 to 2264, you can use the following formula:
Inflation rate = (CPI in 2264 - CPI in 2263) / CPI in 2263
Step 1: Find the difference in CPI values between the two years.
Difference = 616.6 (CPI in 2264) - 574.4 (CPI in 2263) = 42.2
Step 2: Divide the difference by the CPI in 2263.
Inflation rate = 42.2 / 574.4 = 0.07345 (rounded to 5 decimal places)
Step 3: Convert the inflation rate to 4 decimal places in decimal format.
Inflation rate = 0.0735
So, the inflation rate of airfare from 2263 to 2264 is 0.0735 or 7.35% when expressed as a percentage.
Detailed Explanation:
Inflation rate is a measure of the percentage increase in prices of goods and services over a specific period of time. In this case, we are calculating the inflation rate for airfare from the year 2263 to 2264 based on the Consumer Price Index (CPI) data provided by the Bureau of Labor Statistics.
The CPI for Airfare in 2263 was 574.4, and in the following year, 2264, it increased to 616.6. To determine the inflation rate, we use the formula:
Inflation rate = ((CPI in year 2 - CPI in year 1) / CPI in year 1) x 100
By substituting the CPI values into the formula, we calculate the difference and divide it by the base year's CPI. The resulting percentage gives us the inflation rate for airfare from 2263 to 2264.
Calculating the difference in CPI values between the two years gives us 42.2. Dividing this difference by the base year's CPI of 574.4, rounded to four decimal places, yields an inflation rate of 0.0735 or 7.35% when expressed as a percentage.
Understanding and calculating inflation rates are crucial for assessing changes in the cost of living, economic trends, and making informed financial decisions. It allows individuals, businesses, and government agencies to adjust their budgets, policies, and investments accordingly.