Question: Problem 7 - 0 9 Inflation is a general increase in prices and may be measured by the Consumer Price Index ( CPI ) .

Problem 7-09
Inflation is a general increase in prices and may be measured by the Consumer Price Index (CPI). Use Appendix A to answer the questions.
a. In Year 1 the CPI was 100;20 years later, it was 225. What was the annual rate of inflation? Round your answer to the nearest whole number. %
b. Nancy and Pam both currently earn $110,000. If the annual rate of inflation is 5 percent, how much must each earn after eleven years to maintain their purchasing power? Round your answer to the nearest dollar.
$
c. Your parents bought a home for $40,000 in Year 1 and sold it in Year 26 for $220,000. What was the annual rate of price increase over the 25 years? Round vour answer to the nearest whole number.
%
Problem 7-09 Inflation is a general increase in prices and may

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