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This example demonstrates how to calculate the inflation rate for 2021. Given a Consumer Price Index (CPI) of 100 for the previous year and 142.22 for 2021, the inflation rate is calculated using the percentage change formula: $$\text{Inflation Rate} = \frac{142.22 - 100}{100} \times 100 = 42.2\%$$ This calculation indicates a 42.2% inflation rate for 2021.

Example Calculation of the 2021 Inflation Rate

Suppose the value of a price index was 250 in one year and 265 in the following year. What was the percentage change in the price level between the two years?

A country's central bank announced that the annual inflation rate for the past year was 4%. If the price index at the end of the year was 156, what was the price index at the beginning of the year? Please provide the final numerical answer.

Calculating a Previous Year's Price Index

Based on the provided data, calculate the annual inflation rate for Year 2 and Year 3. Then, using your calculations, determine whether inflation is accelerating, decelerating, or if the economy is experiencing deflation. Explain your reasoning.

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