Sunday, October 12, 2008

Using the Consumer Price Index to Measure Inflation

The U.S. consumer price index (CPI) for the years 1990 to 2000 is listed below:
1990 - 130.7
1991 - 136.2
1992 - 140.3
1993 - 144.5
1994 - 148.2
1995 - 152.4
1996 - 156.9
1997 - 160.5
1998 - 163.0
1999 - 166.6
2000 - 172.2

To calculate the inflation rate between two years, divide the difference between the CPI in the two years by the value of the CPI in the earlier year and multiply the result by 100.

Inflation Rate = [(CPI in later year - CPI in earlier year) / (CPI in earlier year)] x 100

For example, the inflation rate between 1999 and 2000 was:

[(CPI in 2000 - CPI in 1999) / (CPI in 1999)] x 100 = [(172.2 - 166.6) / 166.6] x 100 = [5.6 / 166.6] x 100 = 3.4%

No comments:

Post a Comment