. How much did prices increase by between 1990 and 1991 (in percentage terms?

Question

b. what is the rate of inflation between 1989 and 1990 c. what is the price index for 1989 d. what is the price index for 1991



Current Year Base Year Index

1988 1.20 1.20

1989 1.50

1990 1.75

1991 1.45

Answer 1

a)
Price index in 1991 = 1.45; price index in 1990 = 1.75. Therefore prices rose by:
(1.45-1.75)/1.75*100 = -0.30/1.75*100 = -17

so prices FELL by 17% in 1991 compared with 1990.

b) inflation between 1989 and 1990. Use the same formula:
(1.75-1.50)/1.50*100 = .25/1.50*100 = 16.7%

c) what is the price index for 1989? You have given it in your table as 1.50. Ditto (d) is 1.45.