Which of the Following Formulas Is Used to Calculate the Inflation

question 45

Multiple Choice

Which of the following formulas is used to calculate the inflation rate?

• A) inflation rate \( =100 \times\left(\frac{\text { CPI in current year }}{\text { CPI in base period }}\right) \)
• B) Inflation rate \( =100 \times \left (\frac{\text { CPI in current year - CPI in previous year }}{\text { CPI in previous year }}\right) \)
• C) Inflation rate \( =100 \times \left (\frac{\text { CPI in previous year - CPI in current year }}{\text { CPI in current year }}\right) \)
• D) inflation rate \( =100 \times\left(\frac{\text { CPI in previous year }}{\text { CPI in current year }}\right) \)
• E) inflation rate \( =100 \times\left(\frac{\text { CPI in base year }}{\text { CPI in current year }}\right) \)

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Definitions:

Double-Declining-Balance Method

A form of accelerated depreciation where an asset loses value at twice the rate of the traditional straight-line method.

Depreciation

Methodically dividing the cost of a tangible asset throughout its effective life.

Residual Value

The estimated amount that an asset will be worth at the end of its useful life, after it has been fully depreciated.

Straight-Line Depreciation

A method of allocating the cost of a tangible asset over its useful life evenly.