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Inflation Exercise 2
Item Weight Price Year 1 Price Year 2 Price Year 3 Year 1 Price Index
(Base Year)		 Year 1 Weighted Index Year 2 Price Index Year 2 Weighted Index
CPI		 Year 3 Price Index Year 3 Weighted Index
CPI

Inflation in Year 2: (-) / = %

Inflation in Year 3: (-) / = %





Well done. Both calculations are correct.

Good job. You correctly calculated Year 2, but you did not calculate Year 3 correctly.

Good job. You correctly calculated Year 3, but you did not calculate Year 2 correctly.

You did not calculate either year correctly.

Name:

Correct Answers Your Answers
Year 2 % %
Year 3 % %

The correct answers are:

  • Year 2: %
  • Year 3: %

Your answers are:

  • Year 2: %
  • Year 3: %

Really well done. Please email a screen shot of this to your teacher to show that you have completed this work correctly.

Don't worry, practice makes perfect. The aim of this exercise is not to see if you could do it the first time. It's to allow you to practise and get better.

Please reload the page to try again with another set of figures. Once you get the answer correct, take a screen shot of the result and email this to your teacher.

If you think you go the correct answer and there was a glitch in marking it (e.g. due to rounding errors), email this screenshot to your teacher. They will then be able to review. If you legitimately got the answer right, then your teacher will update the markbook accordingly.

Instructions


Inflation in Year 2: %

Inflation in Year 3: %

This is an exercise to assess your knowledge of how to calculate inflation.

The table above gives you a selection of random items and their prices in three years.

Your task is to calculate the inflation for year 2 and year 3. You can use the extra columns in the table above as a guide to how to do this. You can also click through the steps below.

When you have found your answer please enter it into the boxes above. Be sure to enter your name. When you submit your answer you will see the completed table with the correct answers. You will also be told whether the answers you submitted are correct. Your teacher will see whether you have reached the correct answer.

If you wish you may change the random allocation of prices by clicking here:

Clickthrough Guide:

Step 1: Assign Weights

Weight the items in your basket according to how much you purchase them. Remember to have the weights add up to a multiple of 10.

Step 2: Create Base Year Index

Assign a value of 100 for the price index of each item in Year 1 (the base year). Why do we do this?

Step 3: Create Price Index for Years 2 and 3

Assign a value of 100 for the price index of each item in Year 1 (the base year). Why do we do this?

Remember the formula will be: Year 2 Index = (Price Year 2 / Price Year 1) x 100

Step 4: Create a Weighted Index for Years 2 and 3.

Formula: Weighted Index = Price Index x Weight

Optional: create a weighted price index for Year 1. Why is this not necessary?

Step 5: Add up the total of the Weighted Index for Years 2 and 3

Step 6: Divide the total of each Weighted Index by the total of the weighted values.

Step 7: Compare the difference of the average Weighted Index compared to the year before.

Express as a percentage. This is the inflation rate; this is your answer.

Helpful tip: the percentage change between Year 1 and Year 2 will be easy. You need to be careful with the change from Year 2 to Year 3.

The trick is to remember that the year you are comparing against has changed as well.

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