Consumer Prices Rose By 3.2% Annually in July

EconEye Admin

3 years ago

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

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

c) can; by annualizing the monthly inflation rate

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

Wrong! - Can we recalculate either the annual inflation rate or the monthly inflation rate to make a comparison of the two inflation rates over the same time period?

That's Right! - If we want to compare the annual inflation rate and the monthly inflation rate, we need to compare them both on an annual basis. We can do this by annualizing the monthly inflation rate.

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

b) there is a calculation error

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

Wrong! - What is the monthly inflation rate and how is it calculated? What is the annual inflation rate and how is it calculated? Why would the annualized monthly inflation rate differ from the annual inflation rate?

Correct! - The monthly inflation rate annualized is the annual inflation rate if the July inflation rate of 0.2% continues for 12 months. The annual inflation rate measures the percentage change in the price level between July 2023 and July 2022.

Share this: