Question

Please Help! Inflation Rate

Answer 1

n the early 1980's Brazil's inflation was running rampant at about 12% per month. Assuming this inflation rate continued unchecked.
A. suppose an item's initial price P0, write a formula for the items price P after t months

Answer 2

\[P _{0}\] not P0

Answer 3

Ok. What is the part you need help with specifically?

Answer 4

I don't understand how to write that into a formula

Answer 5

Ok, so we have p0 for the initial price, p for the final price, t for time and 0.12 fortune inflation rate right?

Answer 6

yes

Answer 7

So, after1 month, what would the price of anime that costs p0 now? Can you tell?

Answer 8

An item* (I'm on ipad in the train now sorr for that)

Answer 9

no I can't tell...

Answer 10

that's okay

Answer 11

Ok, will it go up or down?

Answer 12

up

Answer 13

Right,so do you agre tha 1+0.12 times po would be a good estimate aftgt1 month?

Answer 14

yes

Answer 15

Would it go linear from that point?

Answer 16

no because its increasing at a constant percent, making it exponential..right?

Answer 17

Correct

Answer 18

So we use time as an exponenr

Answer 19

Like po(1+0.12)^t would that work?

Answer 20

yes

Answer 21

Wel, then that your formula

Answer 22

okay thank you, and for B it says " If the inflation rate is 12% per month, what is the annual inflation rate" do I just multiply by 12?

Answer 23

No

Answer 24

Take po and compare it to the result of p after 12 t

Answer 25

No

Answer 26

Sorry internet was out for me because of a subway tunnel

Answer 27

no problem

Answer 28

Take for example po of 100, what would p be after 12 monts?

Answer 29

1.46?

Answer 30

That doesn't seem right the price should increase not decrease, how did you get a number that low?

Answer 31

I can not use the equation tool but, remember te one we wrote?

Answer 32

well I was following my textbook and to find the yearly amount it says to square the number with base 12

Answer 33

yes I do

Answer 34

Ok than can you fill it in with a value of 100 and a time lapse of 12 months?

Answer 35

I'm not sure, I'm confused

Answer 36

The formula po(1+0.12)^t

Answer 37

If you insert 100(1+0.12)^12

Answer 38

it would be 389.5 right?

Answer 39

Yes,

Answer 40

Does that look like an increase of 144%

Answer 41

I think so

Answer 42

Not quite, what is 100% of 100 + 144% of 100?

Answer 43

Or written differently 1.00*100 + 1.44*100 = ?

Answer 44

244

Answer 45

Our number was 389 though, a bit bigger. That's because the interest is not linear

Answer 46

ok

Answer 47

Luckily, by simply doing 389.59-100 we can see that the percentage of increase after a year is 289.59

Answer 48

289.59%

Answer 49

You can see for yourself that if you write po(1+0.12)^t with t in months and po(1+2.89597599()^t/12 that both funcions give roughly the same result.

Answer 50

okay, thank you for walking me through it

Answer 51

No proble