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Unformatted text preview: While it is simple to calculate the inflation rate between the base year and a comparison year, it is a bit more difficult to calculate the rate of inflation between two comparison years. To make this calculation, first check that both comparison years use the same base year. This is necessary to ensure that the same fixed basket of goods and services is used. Next, to calculate the percentage change in the level of the CPI, subtract the CPI for the later year from the CPI for the earlier year and then divide by the CPI for the earlier year. In the example from Country B, the CPI for period 2 was 141 and the CPI for period 3 was 182. Since the base year for these CPI calculations was period 1, we must use the method of calculating inflation that takes into account the presence of two comparison years. We need to subtract the CPI for the later year from the CPI for the earlier year years....
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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