What formula represents the calculation for the inflation rate?

The calculation for the inflation rate is accurately represented by the formula where you take the difference between the Consumer Price Index (CPI) of the current year and the previous year, divide that by the CPI of the previous year, and then multiply by 100 to convert it into a percentage. This formula captures the change in price levels over time. By comparing the current CPI to the previous year's CPI, you can determine how much prices have increased (or decreased), effectively measuring the rate of inflation.

This method is standard in economics for calculating inflation because it provides a percentage increase, making it easier to understand the relative change in purchasing power and price levels over a specified time. It reflects the economic reality that price changes can affect consumers and businesses, offering a crucial indicator of economic health.

The other options do not correctly represent the inflation rate. One option subtracts the previous CPI from the current CPI without calculating a percentage change, while another option uses the incorrect order of operations or wrong arithmetic, and one mistakenly adds the two indices rather than measuring their difference relative to the previous period.