Consumer Prices Rose By 3.2% Annually in July

For the first time in more than 12 months, the pace of consumer price hikes accelerated on an annual basis to 3.2%. Prices in July rose 0.2% on a monthly basis.—cnn.com

Answer the following questions to check your understanding of the story.

Can we compare the annual inflation rate and the monthly inflation rate?

We ___________ compare the annual inflation rate and the monthly inflation rate ____________.

a) can; only if the monthly inflation rate is the same for every month in a 12-month period

b) can’t; because one is on an annual basis and the other is on a monthly basis

c) can; by annualizing the monthly inflation rate

d) can’t; because they measure inflation for two different time periods

The July monthly inflation rate of 0.2% is an annualized rate of 2.4% Why is the annualized monthly inflation rate not equal to the annual inflation rate of 3.2%?

The two inflation rates are not equal because ____________.

a) there is a calculation error

b) prices always rise more year-over-year than month-over-month

c) the monthly rate measures annual inflation assuming the monthly rate continues for 12 months, and the annual rate measures the percentage change in the price level year-over-year

d) the monthly rate is a core inflation measure, and the annual rate is not

Consumer Prices Rose By 3.2% Annually in July

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