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

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

anonymous · Answer

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$2.17$.

anonymous · Answer

thanks!