If the inflation rate is 5% and the current price of a commodity is $200, what w

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Question: If the inflation rate is 5% and the current price of a commodity is $200, what will be the price after one year? (2023)

Options:

Correct Answer: $210

Exam Year: 2023

Solution:

Price after one year = Current Price * (1 + Inflation Rate) = 200 * (1 + 0.05) = 200 * 1.05 = $210.

If the inflation rate is 5% and the current price of a commodity is $200, what will be the price after one year? (2023)

If the inflation rate is 5% and the current price of a commodity is $200, what will be the price after one year? (2023)

Step 1: Identify the current price of the commodity, which is $200.
Step 2: Identify the inflation rate, which is 5%. Convert this percentage to a decimal by dividing by 100, so 5% becomes 0.05.
Step 3: Calculate the total multiplier by adding 1 to the inflation rate decimal: 1 + 0.05 = 1.05.
Step 4: Multiply the current price by the total multiplier: $200 * 1.05.
Step 5: Perform the multiplication: $200 * 1.05 = $210.
Step 6: The price after one year will be $210.

Inflation Calculation – Understanding how to adjust current prices based on a given inflation rate.