|Posted on April 16, 2014 at 10:35 AM|
The inflation rate measures the percentage increase in consumer prices over a period of time. To calculate the inflation rate, we use a consumer price index (CPI). The consumer price index tracks the prices of goods and services that the typical household buys using a market basket sample (CPI = Market Basket of Specific Year / Market Basket of a Base Year).
The No Bull Review diagram below shows the formula for calculating the inflation rate when you have the CPIs.
AP Macroeconomics Unit 2 Measuring Economic Performance