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Inflation rate
 
 
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In economics
Economics

File:Ballard Farmers' Market - vegetables.jpgEconomics is the Social sciences that studies the Production theory basics, Distribution , and Consumption of Good and Service ....
, the inflation rate is a measure of inflation
Inflation

In economics, inflation is a rise in the general price level of goods and services in an economy over a period of time. The term "inflation" once referred to increases in the money supply ; however, economic debates about the relationship between money supply and price levels have led to its primary use today in describing price inflatio...
, the rate of increase of a price index
Price index

A price index is a normalized average of prices for a given class of Good s or Service s in a given region, during a given interval of time. It is a statistic designed to help to compare how these prices, taken as a whole, differ between time periods or geographical locations....
 (for example, a consumer price index
Consumer price index

A consumer price index is a measure of the average price of consumer goods and services purchased by households. It is a price index determined by measuring the price of a standard group of goods meant to represent the typical market basket of a typical urban consumer....
).It is the percentage rate of change in price level overtime. The rate of decrease in the purchasing power
Purchasing power

Purchasing power is the number of goods/services that can be purchased with a unit of currency. For example, if you had taken one dollar to a store in the 1950s, you would have been able to buy a greater number of items than you would today, indicating that you would have had a greater purchasing power in the 1950s....
 of money is approximately equal.

It's used to calculate the real interest rate
Real interest rate

The "real interest rate" is approximately the nominal interest rate minus the inflation rate . Since the inflation rate over the course of a loan is not known initially, Volatility_ in inflation represents a risk to both the lender and the borrower....
, as well as real increases in wages, and official measurements of this rate act as input variables to COLA adjustments and Inflation derivatives
Inflation derivatives

In finance, inflation derivatives refer to over-the-counter and exchange-traded derivative that are used to transfer inflation risk from one counterparty to another....
 prices.

Description of the rate
The rate is usually expressed in annual
Annual

Annual is typically used to describe something that happens once a year. Circannual describes events that take place over the course of one year and repeat year after year....
ized terms, though the measurement periods are usually different from one year.






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In economics
Economics

File:Ballard Farmers' Market - vegetables.jpgEconomics is the Social sciences that studies the Production theory basics, Distribution , and Consumption of Good and Service ....
, the inflation rate is a measure of inflation
Inflation

In economics, inflation is a rise in the general price level of goods and services in an economy over a period of time. The term "inflation" once referred to increases in the money supply ; however, economic debates about the relationship between money supply and price levels have led to its primary use today in describing price inflatio...
, the rate of increase of a price index
Price index

A price index is a normalized average of prices for a given class of Good s or Service s in a given region, during a given interval of time. It is a statistic designed to help to compare how these prices, taken as a whole, differ between time periods or geographical locations....
 (for example, a consumer price index
Consumer price index

A consumer price index is a measure of the average price of consumer goods and services purchased by households. It is a price index determined by measuring the price of a standard group of goods meant to represent the typical market basket of a typical urban consumer....
).It is the percentage rate of change in price level overtime. The rate of decrease in the purchasing power
Purchasing power

Purchasing power is the number of goods/services that can be purchased with a unit of currency. For example, if you had taken one dollar to a store in the 1950s, you would have been able to buy a greater number of items than you would today, indicating that you would have had a greater purchasing power in the 1950s....
 of money is approximately equal.

It's used to calculate the real interest rate
Real interest rate

The "real interest rate" is approximately the nominal interest rate minus the inflation rate . Since the inflation rate over the course of a loan is not known initially, Volatility_ in inflation represents a risk to both the lender and the borrower....
, as well as real increases in wages, and official measurements of this rate act as input variables to COLA adjustments and Inflation derivatives
Inflation derivatives

In finance, inflation derivatives refer to over-the-counter and exchange-traded derivative that are used to transfer inflation risk from one counterparty to another....
 prices.

Description of the rate


The rate is usually expressed in annual
Annual

Annual is typically used to describe something that happens once a year. Circannual describes events that take place over the course of one year and repeat year after year....
ized terms, though the measurement periods are usually different from one year. Inflation rates are often given in seasonally adjusted
Seasonal adjustment

Seasonal adjustment is a statistical method for removing the seasonal component of a time series analysis used when analyzing non-seasonal trends....
 terms, removing systematic
Systematic

Systematic was a Rock music band from San Jose, California.The band was one of the first signings to Metallica drummer Lars Ulrich's record label, The Music Company ....
 quarter-to-quarter variation.

Definitions


If is the current average price level and is the price level a year ago, the rate of inflation during the year might be measured as follows:



After the year the purchasing power
Purchasing power

Purchasing power is the number of goods/services that can be purchased with a unit of currency. For example, if you had taken one dollar to a store in the 1950s, you would have been able to buy a greater number of items than you would today, indicating that you would have had a greater purchasing power in the 1950s....
 of a unit of money is multiplied by a factor 1 / ( 1 + inflation rate ).

There are other ways of defining the inflation rate, such as (using the natural log), again stated as a percentage. In this case after the year the purchasing power of a unit of money is multiplied by a factor .

There are two general methods for calculating inflation rates - one is to use a base period, the other is to use "chained" measurements. Chained measurements adjust not only the prices, but the contents of the market basket
Market basket

The term market basket or commodity bundle refers to a fixed list of items used specifically to track the progress of inflation in an economics or specific market....
 involved, with each price period. More common, however, is the base period reference. This can be seen from inflation reports from the "relative weight" assigned to each component, and by looking at the technical notes to see what each item in an inflation basket represents and how it is calculated.

See also

  • List of countries by inflation rate
    List of countries by inflation rate

    This is the list of countries by inflation rate. Inflation rate is defined as the annual percent change in consumer prices compared with the previous year's consumer prices....
  • Measures of inflation
    Inflation

    In economics, inflation is a rise in the general price level of goods and services in an economy over a period of time. The term "inflation" once referred to increases in the money supply ; however, economic debates about the relationship between money supply and price levels have led to its primary use today in describing price inflatio...
  • Units of inflation
    Hyperinflation

    File:Bundesarchiv Bild 102-00104, Inflation, Tapezieren mit Geldscheinen.jpgIn economics, hyperinflation is inflation that is very high or "out of control", a condition in which prices increase rapidly as a currency loses its value....
  • Econometrics
    Econometrics

    Econometrics is concerned with the tasks of developing and applying quantitative or statistical methods to the study and elucidation of economic principles....
  • Interest rate
    Interest rate

    An interest rate is the price a borrower pays for the use of money they do not own, for instance a small company might borrow from a bank to kick start their business, and the return a lender receives for deferring the use of funds, by lending it to the borrower....
  • Deflation
  • Inflation
    Inflation

    In economics, inflation is a rise in the general price level of goods and services in an economy over a period of time. The term "inflation" once referred to increases in the money supply ; however, economic debates about the relationship between money supply and price levels have led to its primary use today in describing price inflatio...
  • Hyperinflation
    Hyperinflation

    File:Bundesarchiv Bild 102-00104, Inflation, Tapezieren mit Geldscheinen.jpgIn economics, hyperinflation is inflation that is very high or "out of control", a condition in which prices increase rapidly as a currency loses its value....


External links

  • Bureau of Labor Statistics, United States Department of Labor.
  • US Inflation Calculator and Rate Charts (1913-current).