Question

If the price index was 90 in year 1, 100 in year 2, and 95 in year 3, then the economy experienced

Answer 1

ANSWER:

The inflation between year 1 and year 2 = ( ( price index in year 2 - price index in year 1) / price index in year 1) * 100

The inflation between year 1 and year 2 = ( ( 100 - 90) / 90) * 100

The inflation between year 1 and year 2 = ( 10 / 90) * 100

The inflation between year 1 and year 2 = 0.1111 * 100

The inflation between year 1 and year 2 = 11.11%

between year 1 and 2 there was an inflation of 11.1%

The inflation between year 2 and year 3 = ( ( price index in year 3 - price index in year 2) / price index in year 2) * 100

The inflation between year 2 and year 3 = ( ( 95 - 100) / 100) * 100

The inflation between year 2 and year 3 = ( -5 / 100) * 100

The inflation between year 2 and year 3 = -0.05 * 100

The inflation between year 2 and year 3 = -5%

so between years 2 nd year 3 there was a deflation of 5%

so we can say that economy experienced inflation of 11.1% between years 1 and 2 and delation between years 2 and 3.