Compute inflation rates in the following cases.

(a)?Suppose the consumer price index in the future takes the following values:

P₂₀₂₀ = 110, P₂₀₂₁ = 113, P_2022?= 118, P₂₀₂₃ = 120, P_2024?= 125. Viewing these price levels as prevailing at the end of each year, calculate the inflation rate for the years 2021, 2022, 2023, and 2024.

(b) Consider the data on the CPI from Table 8.1. Compute the average annual rate of inflation that prevailed between 1980 and 2015. This calculation is similar to the computation of an average annual growth rate, say for real GDP.

(c) Referring to the same CPI data in part (b), compute the average annual inflation rate between 1970 and 1980. What was the rate between 1900 and 2015?

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TABLE 8.1 The Consumer Price Index, 1900-2015 (2015 = 100) Year CPI Year CPI 1900 3.43 1980 34.76 7.05 1930 1990 55.14 72.65 1950 10.16 2000 1960 12.50 2010 92.00 1970 100.00 16.39 2015