Question

The inflation rate of the U.S. dollar is 3.1 percent. What this means is that every year, prices increase by 3.1 percent. If a paperback book cost $1.98 three years ago, what does it cost now?
a.
$1.80
b.
$2.17
c.
$2.04
d.
$5.76

Answer 1

Each year the price increases by \(3.1\%\), which is identical to multiplying by \(1.031\). Since three years have passed since it was \($1.98\), the new price is \($(1.98\times1.031\times1.031\times1.031)=$(1.98\times1.031^3)\approx$2.17\).

Answer 2

thanks!