Inflation is an upward movement in the average level of prices. Its opposite is deflation, a downward movement in the average level of prices. The boundary between inflation and deflation is price stability.
- Parkin & Bade
Inflation is caused by a combination of four factors:
- The supply of money goes up.
- The supply of other goods goes down.
- Demand for money goes down.
- Demand for other goods goes up.
The formula for calculating the Inflation Rate looks like this:
((B - A)/A)*100
So if exactly one year ago the Consumer Price Index was 178 and today the CPI is 185, then the calculations would look like this:
which equals 3.93% inflation over the sample year.
Consider the U.S. system…..
The Consumer Price Index (CPI-U) is compiled by the Bureau of Labor Statistics and is based upon a 1982 Base of 100. A Consumer Price Index of 158 indicates 58% inflation since 1982, the commonly quoted inflation rate of say 3% is actually the change in the Consumer Price Index from a year earlier.
For more..keep checking the blog.
Some related links..
http://www.bls.gov/CPI/ /* homepage of U.S. CONSUMER PRICE INDEX */
For inflation in India wait for my next post….
Plzz comment and discuss….