Answer to Question #154797 in Economics for Traig

Question

What tool best determines inflation

Answer 1

There are several methods for measuring inflation. The main method for measuring inflation is to calculate inflation using a price index. When calculating the price index, there are also different methods: the consumer price index, producer prices, the identifier of the gross domestic product. Such indices are distinguished according to the products and values ​​that are included in the basket or set being evaluated.

To calculate the price index, you need to know the full value of the market basket for a given or current year and its value in the base year. The general formula for the price index indicator is represented by the following equality:

Price index = current year market basket value / base year basket value

Suppose the base year is 2017, in this case, it is necessary to calculate the value of the market basket at current prices, that is, the prices of this year (the numerator in the formula) and the value of the market set at the base prices of 2017 (the denominator of the formula).

The rate or rate of inflation reflects the rate of price increases and is calculated using the following formula:

Inflation rate = (PI1 - PI0) / PI0 x 100%