If the inflation rate is 5%, how much will a product that costs $100 cost after

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Question: If the inflation rate is 5%, how much will a product that costs $100 cost after one year? (2023)

Options:

Correct Answer: $105

Exam Year: 2023

Solution:

With a 5% inflation rate, a $100 product will cost $100 + ($100 * 0.05) = $105 after one year.

If the inflation rate is 5%, how much will a product that costs $100 cost after one year? (2023)

If the inflation rate is 5%, how much will a product that costs $100 cost after one year? (2023)

Step 1: Identify the original cost of the product, which is $100.
Step 2: Identify the inflation rate, which is 5%.
Step 3: Convert the percentage into a decimal by dividing by 100. So, 5% becomes 0.05.
Step 4: Calculate the amount of increase due to inflation by multiplying the original cost by the decimal. This is $100 * 0.05.
Step 5: Calculate the increase amount, which is $5.
Step 6: Add the increase amount to the original cost. So, $100 + $5 equals $105.
Step 7: The final cost of the product after one year is $105.

Inflation Calculation – Understanding how inflation affects the price of goods over time.