If the inflation rate is 6% and a car costs $20,000 now, what will be its cost a

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Question: If the inflation rate is 6% and a car costs $20,000 now, what will be its cost after one year?

Options:

Correct Answer: $21,200

Solution:

Cost after inflation = 20,000 * (1 + 0.06) = 20,000 * 1.06 = $21,200.

If the inflation rate is 6% and a car costs $20,000 now, what will be its cost after one year?

If the inflation rate is 6% and a car costs $20,000 now, what will be its cost after one year?

Step 1: Identify the current cost of the car, which is $20,000.
Step 2: Identify the inflation rate, which is 6%.
Step 3: Convert the inflation rate from a percentage to a decimal by dividing by 100. So, 6% becomes 0.06.
Step 4: Add 1 to the decimal inflation rate. This gives you 1 + 0.06 = 1.06.
Step 5: Multiply the current cost of the car by the result from Step 4. So, $20,000 * 1.06.
Step 6: Calculate the result of the multiplication. $20,000 * 1.06 = $21,200.
Step 7: The cost of the car after one year, considering inflation, will be $21,200.

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