How is inflation measured?

Inflation is a general rise in the price of goods and services from one period to another. Inflation is given as a percentage.

The Consumer Price Index (CPI) keeps track of all prices of household goods and services over time.

The percent of increase of the Consumer Price Index from one period to the next period is called inflation. (Note: If it is a decrease, then it is called deflation.)

To measure current inflation, use the following equation:

Inflation = ( (CPI Increase) * 100) / Past CPI )

So, now you know the answer to "How is inflation measured?" and you can pass your next Economics exam.

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