Questions: Use the data below to answer question Nominal Income and CPI Year Nominal Income CPI 2019 56800 205 2020 64709 228 The inflation rate for 2020 is approximately: 11.22 % 2.55 % 3.66 % 5.14 %

Use the data below to answer question Nominal Income and CPI Year Nominal Income CPI 2019 56800 205 2020 64709 228 The inflation rate for 2020 is approximately: 11.22 % 2.55 % 3.66 % 5.14 %
Transcript text: Use the data below to answer question Nominal Income and CPI \begin{tabular}{|l|l|l|} \hline Year & Nominal Income & CPI \\ \hline 2019 & $\$ 56800$ & 205 \\ \hline 2020 & $\$ 64709$ & 228 \\ \hline \end{tabular} The inflation rate for 2020 is approximately: $11.22 \%$ $2.55 \%$ $3.66 \%$ $5.14 \%$
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Solution

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The answer is: $11.22 \%$

To determine the inflation rate for 2020, we need to use the Consumer Price Index (CPI) values for 2019 and 2020. The formula for calculating the inflation rate is:

\[ \text{Inflation Rate} = \left( \frac{\text{CPI in 2020} - \text{CPI in 2019}}{\text{CPI in 2019}} \right) \times 100 \]

Using the given data:

  • CPI in 2019 = 205
  • CPI in 2020 = 228

Plugging these values into the formula:

\[ \text{Inflation Rate} = \left( \frac{228 - 205}{205} \right) \times 100 \]

\[ \text{Inflation Rate} = \left( \frac{23}{205} \right) \times 100 \]

\[ \text{Inflation Rate} \approx 0.1122 \times 100 \]

\[ \text{Inflation Rate} \approx 11.22\% \]

Therefore, the correct answer is $11.22 \%$.

Explanation for other options:

  • $2.55 \%$: This is incorrect because it significantly underestimates the actual inflation rate calculated.
  • $3.66 \%$: This is incorrect as it also underestimates the actual inflation rate.
  • $5.14 \%$: This is incorrect and underestimates the actual inflation rate.

The correct calculation confirms that the inflation rate for 2020 is approximately $11.22 \%$.

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