If the price index increased from 100 in 2021 to 110 in 2022 to 132 in 2023, then the rate of inflation is :
10%
32%
20%
Cannot be determined
Answer is Right!
Answer is Wrong!
This question was previously asked in
UPSC CDS-2 – 2024
– Inflation rate from 2021 to 2022:
`((Index in 2022 – Index in 2021) / Index in 2021) * 100`
`((110 – 100) / 100) * 100 = (10 / 100) * 100 = 10%`
– Inflation rate from 2022 to 2023:
`((Index in 2023 – Index in 2022) / Index in 2022) * 100`
`((132 – 110) / 110) * 100 = (22 / 110) * 100 = (1/5) * 100 = 20%`
The inflation rates for the two periods are 10% and 20%. The question asks for “the rate of inflation” (singular). In such sequences, it often refers to the rate in the most recent period calculated or the cumulative change. The cumulative percentage increase from 2021 to 2023 is `((132 – 100) / 100) * 100 = 32%`. Both 20% (rate in 2023) and 32% (total change) are among the options (A and B are not possible as singular rates for the whole period). However, the standard interpretation of “the rate of inflation” when a time series is given is often the latest period’s annual rate. Thus, 20% is the most likely intended answer as it represents the inflation rate for the year 2023.