Understanding Inflation Rate
Inflation is 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 varying targets of the annual inflation rate.
How to Calculate Inflation Rate
The rate of inflation is calculated by comparing the price of a basket of goods and services in one period to the price of the same basket in another period. The most common way to measure inflation is using the Consumer Price Index (CPI). The formula to calculate the annual inflation rate is:
Inflation Rate = [ (Price Level in Current Year – Price Level in Past Year) / Price Level in Past Year ] * 100
Where:
- Price Level in Current Year: The cost of the basket of goods and services in the most recent period you are analyzing.
- Price Level in Past Year: The cost of the same basket of goods and services in a previous period.
A positive inflation rate indicates that prices have risen over the period, meaning your money buys less than it did before. A negative inflation rate (deflation) indicates that prices have fallen.
Example:
Let's say a basket of groceries cost $95.00 in 2022 and the same basket costs $100.00 in 2023.
- Price Level in Current Year (2023) = $100.00
- Price Level in Past Year (2022) = $95.00
Using the formula:
Inflation Rate = [ ($100.00 – $95.00) / $95.00 ] * 100
Inflation Rate = [ $5.00 / $95.00 ] * 100
Inflation Rate ≈ 0.0526 * 100
Inflation Rate ≈ 5.26%
This means there was an approximate inflation rate of 5.26% between 2022 and 2023.
function calculateInflation() {
var currentPrice = parseFloat(document.getElementById("currentPrice").value);
var pastPrice = parseFloat(document.getElementById("pastPrice").value);
var resultDiv = document.getElementById("result");
if (isNaN(currentPrice) || isNaN(pastPrice)) {
resultDiv.innerHTML = "Please enter valid numbers for both prices.";
return;
}
if (pastPrice <= 0) {
resultDiv.innerHTML = "The past price must be greater than zero to calculate inflation.";
return;
}
var inflationRate = ((currentPrice – pastPrice) / pastPrice) * 100;
var resultHTML = "
Result:
";
resultHTML += "Inflation Rate:
" + inflationRate.toFixed(2) + "%";
if (inflationRate > 0) {
resultHTML += "This indicates that prices have increased by " + inflationRate.toFixed(2) + "% over the period.";
} else if (inflationRate < 0) {
resultHTML += "This indicates deflation. Prices have decreased by " + Math.abs(inflationRate).toFixed(2) + "% over the period.";
} else {
resultHTML += "There has been no change in prices over the period.";
}
resultDiv.innerHTML = resultHTML;
}
.inflation-calculator-container {
font-family: sans-serif;
max-width: 800px;
margin: 20px auto;
padding: 20px;
border: 1px solid #ddd;
border-radius: 8px;
box-shadow: 0 2px 4px rgba(0,0,0,0.1);
}
.calculator-inputs, .calculator-results, .calculator-explanation {
margin-bottom: 25px;
padding: 15px;
border-radius: 5px;
background-color: #f9f9f9;
}
.calculator-inputs {
background-color: #eef7ff;
}
.calculator-results {
background-color: #fff8e1;
border: 1px dashed #f0c419;
}
.calculator-explanation {
background-color: #f0fff0;
border: 1px dashed #28a745;
}
.calculator-inputs h2, .calculator-results h3, .calculator-explanation h3 {
margin-top: 0;
color: #333;
}
.input-group {
margin-bottom: 15px;
}
.input-group label {
display: block;
margin-bottom: 5px;
font-weight: bold;
color: #555;
}
.input-group input[type="number"] {
width: calc(100% – 22px); /* Account for padding and border */
padding: 10px;
border: 1px solid #ccc;
border-radius: 4px;
font-size: 1rem;
}
.inflation-calculator-container button {
display: inline-block;
background-color: #007bff;
color: white;
padding: 10px 20px;
border: none;
border-radius: 4px;
font-size: 1rem;
cursor: pointer;
transition: background-color 0.3s ease;
}
.inflation-calculator-container button:hover {
background-color: #0056b3;
}
.calculator-results #result p {
font-size: 1.1rem;
margin-bottom: 10px;
}
.calculator-results #result strong {
color: #d9534f;
}
.calculator-explanation p, .calculator-explanation ul {
line-height: 1.6;
color: #444;
}
.calculator-explanation ul {
margin-left: 20px;
}
.calculator-explanation li {
margin-bottom: 8px;
}
.calculator-explanation h4 {
margin-top: 20px;
color: #0056b3;
}