If the inflation rate is 5% and a car costs $20,000, what will be the cost of th

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Question: If the inflation rate is 5% and a car costs $20,000, what will be the cost of the car after one year?

Options:

Correct Answer: $21,000

Solution:

Cost after inflation = 20,000 * (1 + 0.05) = 20,000 * 1.05 = $21,000.

If the inflation rate is 5% and a car costs $20,000, what will be the cost of the car after one year?

If the inflation rate is 5% and a car costs $20,000, what will be the cost of the car after one year?

Step 1: Identify the current cost of the car, which is $20,000.
Step 2: Identify the inflation rate, which is 5%.
Step 3: Convert the inflation rate from a percentage to a decimal by dividing by 100. So, 5% becomes 0.05.
Step 4: Add 1 to the decimal inflation rate. This gives you 1 + 0.05 = 1.05.
Step 5: Multiply the current cost of the car ($20,000) by the result from Step 4 (1.05). So, $20,000 * 1.05 = $21,000.
Step 6: The cost of the car after one year, considering the inflation, will be $21,000.

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