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Inflation Vs
Inflation Vs
Many people are confused by the difference between Inflation and the Consumer Price Index. The Consumer Price Index is as its name implies an index, or a number used to measure change.
Price Deflation is, of course, the percentage decrease in the price of the basket of products over a specific period of time. For convenience Price Inflation has been shortened in common usage to simply Inflation and similarly Price Deflation has been shortened to Deflation. (*Interestingly this is not Websters definition of Inflation More) In order to calculate the percent of inflation or deflation we have to use the Consumer Price Index as a starting point. So assuming You wanted to calculate the inflation rate from July 2000 until July 2008. You need to know the CPI for the starting and ending dates. So the CPI index in July 2000 is 172.8 and the CPI index is 219.964 in July 2008. (Note they went to a three decimal place accuracy in between).