2. Calculating Inflation

a. Fill in the blank boxes below:

Nominal and Real Values of a House over Five Years
Year	2010	2015	Percent Change
Nominal Value	$250.000	$260.000
CPI (December)
Real Value

b. Using our formula for converting base prices into current prices, 1 , calculate 2 ( 1 ) = 2 the price in year 2 dollars.

c. Show your math and calculate the change in its real value using the nominal value and real values from 2015 dollars. Has the house's real value grown or declined? By how much?

d. Fill in the blank boxes below:

Congressional Budget Office's Nominal and Real GDP Forecasts
Year	2020	2025
Nominal Value	$20.900	$26.500
GDP Deflator
Real Value	$18.400	$21.200

e. Using the values you found for the GDP deflator, find the total inflation (remember, this means percent change between two periods!) from 2020 to 2025.

f. What is the average annual inflation rate the CBO is expecting?