The CPI for "All Items" was 250.546 in April 2018, and 255.548 in April 2019. Over this period, the rate of inflation as measured by the rate of change of the CPI was. True or False: When one calculates a single rate of inflation using the CPI for "All Items," it means that all categories of goods and services experienced the same rate of price change over that period.

Question

Jaliyah Hoffman

Business

20 June, 02:02

The CPI for "All Items" was 250.546 in April 2018, and 255.548 in April 2019. Over this period, the rate of inflation as measured by the rate of change of the CPI was. True or False: When one calculates a single rate of inflation using the CPI for "All Items," it means that all categories of goods and services experienced the same rate of price change over that period.

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Simeon · Answer 1

The statement given in the question is False.

Explanation:

The statement given in the question is False. When one calculates a single rate of inflation using the CPI for "All Items," it doesn't always means that all categories of goods and services experienced the same rate of price change over that period. Normally It is an overall calculation of all goods and services. In other words, It's not essential for all types of goods and services to have same rate of price when there is an inflation.

The calculations are shown below.

Formula for Rate of Inflation:

Rate of Inflation = (CPI of 2019 - CPI of 2018) : CPI of 2018 * 100

Calculations:

As CPI of 'All Items' in April 2018 = 250.546

and CPI of 'All Items' in April 2019 = 255.548

Therefore by putting the values in the above formula, we get

Rate of Inflation = (255.548 - 250.546) / 250.546 * 100

Rate of Inflation = 5.002 / 250.546 * 100

Rate of Inflation = 1.996

Calculating it percentage, we get

Rate of Inflation = 2.0%