How to Calculate Inflation Rate Using CPI Data

What is the formula to calculate the inflation rate with 2012 as the base year?

a. [(CPI in 2013 - CPI in 2012)/CPI in 2013] x 100

b. [(CPI in 2012 - CPI in 2013) / CPI in 2013] x 100

c. [(CPI in 2012 - CPI in 2013)/ CPI in 2012] x 100

d. [(CPI in 2013 - CPI in 2012)/CPI in 2012] x 100

Answer:

For calculating the inflation rate for 2012, with 2012 as the base year, the formula is option d: [(CPI in 2013 - CPI in 2012) / CPI in 2012] x 100. Option D is correct.

The Consumer Price Index (CPI) is a measure of the average price level of a basket of goods and services over time. In this case, we are comparing the CPI for the years 2012 and 2013 to calculate the inflation rate.

To calculate the inflation rate, we take the difference between the CPI in 2013 and the CPI in 2012 and divide it by the CPI in 2012. This gives us the relative change in the price level compared to the base year, expressed as a decimal.

Multiplying this result by 100 gives us the inflation rate as a percentage, showing the percentage increase or decrease in prices from the base year to the subsequent year.

Therefore, the correct formula for calculating the inflation rate with 2012 as the base year is [(CPI in 2013 - CPI in 2012) / CPI in 2012] x 100. Option D is correct.

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