the rate of inflation measures the percentage increase in the price of consumer goods. the rate of inflation…

the rate of inflation measures the percentage increase in the price of consumer goods. the rate of inflation in the year 2020 was 1.2% per year. to get a sense of what this rate would mean in the long run, lets suppose that it persists through 2040. what would be the cost in 2021 of an item that costs $100 in 2020? (enter your answer to two decimal places.) the cost would be $ dollars in 2021.

the rate of inflation measures the percentage increase in the price of consumer goods. the rate of inflation in the year 2020 was 1.2% per year. to get a sense of what this rate would mean in the long run, lets suppose that it persists through 2040. what would be the cost in 2021 of an item that costs $100 in 2020? (enter your answer to two decimal places.) the cost would be $ dollars in 2021.

Answer

Explanation:

Step1: Identify the inflation - rate formula

The formula for calculating the new price with inflation is $P_{new}=P_{old}(1 + r)$, where $P_{old}$ is the old price, $r$ is the inflation rate.

Step2: Substitute the given values

We know that $P_{old}=$100$ and $r = 0.012$ (since $1.2%=0.012$). Then $P_{new}=100\times(1 + 0.012)$.

Step3: Calculate the new price

$P_{new}=100\times1.012=$101.20$.

Answer:

$101.20$