PSAT Math Multiple-Choice Question 772: Answer and Explanation

Question: 772

The value of money is affected by the inflation rate—the higher the inflation rate, the less valuable money will become over time. The rate of inflation is calculated using the formula below, in which CPI represents the consumer price index, a measure of the average of a typical basket of consumer goods and services (where goods and services are weighted relative to how often they are purchased by a normal consumer):

The current rate of inflation would definitely be zero if the CPI a year ago equaled which of the following?

• A. The CPI a year from now
• B. This year's CPI
• C. Zero
• D. 100

Correct Answer: B

Explanation:

(B) In order for the inflation rate, as given by this formula, to equal 0, the numerator of the fraction must equal 0. This will happen if the current year's CPI is equal to the last year's CPI, because subtracting a number from itself equals 0. This matches choice (B).