Let P0 be the initial price level (say, a price index such as the CPI). Let p

Question:

Let P0 be the initial price level (say, a price index such as the CPI). Let p be the inflation rate per period.
(a) If Pt is the price at the end of period t, show that Pt = P0(1 + p)t
(b) If P0 = 1.00 and p = 50 percent per month, calculate P12.
(c) Given P12, calculate the percentage change from P0, that is, the annual rate of inflation when the monthly rate is 50 percent.