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Unformatted text preview: Calculating inflation Inflation is the change in the price level from one year to the next. The change in inflation can be calculated by using whatever price index is most applicable to the given situation. The two most common price indices used in calculating inflation are CPI and the GDP deflator. Know, though, that the inflation rates derived from different price indices will themselves be different. Calculating Inflation Using CPI The price level most commonly used in the United States is the CPI, or consumer price index. Thus, the simplest and most common method of calculating inflation is to calculate the percentage change in the CPI from one year to the next. The CPI is calculated using a fixed basket of goods and services; the percentage change in the CPI therefore tells how much more or less expensive the fixed basket of goods and...
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This note was uploaded on 12/13/2011 for the course ECO 1310 taught by Professor Staff during the Fall '10 term at Texas State.
- Fall '10