Question

In: Economics

how to culculate inflaction?

how to culculate inflaction?

Solutions

Expert Solution

Assuming that the question means inflation.

If inflation is being calculated on a single product, it can be calculated the following way. To calculate inflation, start by subtracting the current price of a good from the historical price of the same good. Then, divide that number by the current price of the good. Finally, multiply that number by 100 and write your answer as a percentage.

If inflation is being calculated by CPI, then inflation is

Inflation=(CPI in current year-CPI in historical year from where inflation is being calculated)/CPI in historical year.

Finally, just for clarification, lets see what CPI is. The Consumer Price Index (CPI) is a measure that examines the weighted average of prices of a basket of consumer goods and services, such as transportation, food, and medical care. It is calculated by taking price changes for each item in the predetermined basket of goods and averaging them. It gets calculated by BLS (Bureau of Labor Statistics) by taking survey of a sample of households every month.


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