Economics Inflation Questions
Inflation is measured using various economic indicators, but the most commonly used measure is the Consumer Price Index (CPI). The CPI tracks the changes in the prices of a basket of goods and services that are representative of the average consumer's spending patterns. By comparing the current prices to a base year, the CPI calculates the percentage change in prices over time, which reflects the inflation rate. Other measures of inflation include the Producer Price Index (PPI), which tracks changes in the prices of goods and services at the wholesale level, and the GDP deflator, which measures inflation in an economy by comparing the current and base year's GDP.