Question

most recent cpi - earlier cpi / earlier) cpi x100 *
○ cpi
○ price level
○ inflation
○ price change

if prices increased 5% last quarter and now increased by 3% it means ___ *
○ prices went down
○ prices went up

Explanation:

First Question (Formula Matching)

The formula \(\frac{\text{most recent CPI}-\text{earlier CPI}}{\text{earlier CPI}}\times100\) is the standard formula for calculating the inflation rate (percentage change in CPI, a measure of inflation). CPI is the index itself, price level is a general term, and price change is too vague. So the formula calculates inflation.

A 5% increase last quarter and a 3% increase now both represent positive percentage changes in prices. Even though the rate of increase slowed (from 5% to 3%), prices are still increasing (going up), not going down.

Answer:

C. inflation

Second Question (Price Trend)