Calculate the Inflation Rate Using Cpi

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Calculate Inflation Rate Using CPI

What is Inflation and How is it Calculated Using CPI?

Inflation refers to the rate at which the general level of prices for goods and services is rising, and subsequently, purchasing power is falling. Central banks attempt to limit inflation, and avoid deflation, with targeted percentage increases in prices, and avoid monetary policy that could lead to either of these issues.

The most common measure of inflation is the Consumer Price Index (CPI). The CPI measures the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.

How to Calculate Inflation Rate Using CPI:

The formula to calculate the inflation rate using CPI is straightforward:

Inflation Rate (%) = [ (CPI in Current Year – CPI in Previous Year) / CPI in Previous Year ] * 100

In this calculator:

  • CPI for Current Year: This is the Consumer Price Index value for the most recent period you are considering.
  • CPI for Previous Year: This is the Consumer Price Index value for the year or period immediately preceding the current year.

By inputting these two values, the calculator will determine the percentage increase in prices over the specified period, indicating the inflation rate.

Example Calculation:

Let's say the CPI for the current year is 280.5 and the CPI for the previous year was 272.0.

  • CPI Current Year = 280.5
  • CPI Previous Year = 272.0

Using the formula:

Inflation Rate = [ (280.5 – 272.0) / 272.0 ] * 100

Inflation Rate = [ 8.5 / 272.0 ] * 100

Inflation Rate = 0.03125 * 100

Inflation Rate = 3.13%

This means that, on average, prices have increased by approximately 3.13% between the previous year and the current year.

function calculateInflation() { var cpiCurrentYear = parseFloat(document.getElementById("cpiCurrentYear").value); var cpiPreviousYear = parseFloat(document.getElementById("cpiPreviousYear").value); var resultDiv = document.getElementById("result"); if (isNaN(cpiCurrentYear) || isNaN(cpiPreviousYear)) { resultDiv.innerHTML = "Please enter valid numbers for both CPI values."; return; } if (cpiPreviousYear === 0) { resultDiv.innerHTML = "CPI for the previous year cannot be zero."; return; } var inflationRate = ((cpiCurrentYear – cpiPreviousYear) / cpiPreviousYear) * 100; // Format to two decimal places var formattedInflationRate = inflationRate.toFixed(2); resultDiv.innerHTML = "

Inflation Rate:

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