Compute the inflation rate for each year 1989-2006 and determine which were years of inflation. In which years did deflation occur? In which years did disinflation occur? Was there hyperinflation in any year?
Please refer attached file for better clarity of tables.
Solution
Inflation = (CPI in t+1 period-CPI in t period)/(CPI in t period)
Growth rates of inflation are calculated for 1989 to 2006 with the use of above formula.
Inflation in 1989=(124-118.3)/118.3=4.82%
Similarly rates have been calculated for all other years.
Deflation means fall in CPI as comared to last year's CPI i.e. negative inflation.
No such evidence of deflation is visible
Hyperinflation means % rises in CPI which ...
Solution Summary
Solution describes the formula for calculating inflation rate for each year. It determines the years when deflation, disinflation or hyperinflation occured.
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