Assume an economy experienced a positive rate of inflation between 2003 and 2004 and again between 2004 and 2005. However, the inflation rate was higher between 2004 and 2005 than it was between 2003 and 2004. Which of the following scenarios is consistent with this assumption? A. The CPI was 100 in 2003, 120 in 2004, and 135 in 2005. B. The CPI was 100 in 2003, 110 in 2004, and 105 in 2005. C. The CPI was 100 in 2003, 105 in 2004, and 130 in 2005. D. The CPI was 100 in 2003, 90 in 2004, and 88 in 2005.

Question

Marcelo Rice

Business

6 November, 05:13

Assume an economy experienced a positive rate of inflation between 2003 and 2004 and again between 2004 and 2005. However, the inflation rate was higher between 2004 and 2005 than it was between 2003 and 2004. Which of the following scenarios is consistent with this assumption? A. The CPI was 100 in 2003, 120 in 2004, and 135 in 2005. B. The CPI was 100 in 2003, 110 in 2004, and 105 in 2005. C. The CPI was 100 in 2003, 105 in 2004, and 130 in 2005. D. The CPI was 100 in 2003, 90 in 2004, and 88 in 2005.

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Answers (1)

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Mohammed Pugh · Answer 1

Option C

Explanation:

We have to look into the option were:

CPI 2005 > CPI 2004 > CPI 2003

else the country wouldn't experienced a positive inflation

and also

2005/2004 is higher than 2004/2003

to make true the statment that inflation during 2005 was higher than in 2004

Option A and option C meet the first requirement

Let's see if A pass the second requirement

Then 135/120 = 1,125 = 12.5% inflation

And 120/100 = 1.2 = 20% inflation

Option A do not pass this requirement

Option C

130/105 = 23.8%

105/100 = 5%

It sucess!