Answer to Question #92589 in Macroeconomics for Unknown287159

Question

Explain how inflation rate ,that is usually reported every month in the media ,is obtained .use hypothetical figures for calculations .

Answer 1

Usually inflation is arises due to market fluctuations. When there is rise of price of rise of commodity over the period of time, the inflation occurs. It may calculated through consumer price index, which is published in various official records including media and newspapers. The consumer price index is based on market search results and based on market survey. There are various ngredients through which any products through the company are made. The rise of price of any one ingredients may also results inflation. Due to inflation, the purchasing power of money decreases. In order to have same effect of purchasing power of money in future years, we can adjusted for inflation.

Suppose in 2014, the consumer price index is with base 100. And in 2019 it is 102.

Then price adjusted for inflation for same effect of purchasing power over the base price of 100 is (102-100)/100=2%.

Means inflation is 2%