What is Inflation?
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Introduction
In this article I will be writing about the Inflation and how it will affect the prices. Many people have the wrong conception about the inflation and prices relationship. This article will point out what is inflation and what is the relationship with price changes. It is one of the important concept everyone must know in the daily life. After reading this article post your feedback on the comments section. I would like to respons to all your feedbacks. You can subscribe to our future articles here.
What is Inflation?
Inflation is term used for describing the percentage of increase in the price levels. It can be calculated in weekly, monthly or annually. Normally it is represented in the annualised figure. Inflation is calculated based on the Wholesale Prixe Index(WPI) in India. Many countries finding the inflation using the Consumer Price Index(CPI).
As their names suggest, the CPI pertains to a set of items that a consumer consumes while the WPI is a basket particular to the wholesale market. Therefore, if the inflation for a particular week is, say, 10 per cent, it means the index is 10 per cent higher than it was the same week the previous year. Then there is core-inflation, which means the inflation rate without taking into account food and fuel. Some say both need to be taken out because of their volatility, while some argue that both items cannot be taken out because a consumer does pay for the rise in their prices.
How to calculate Inflation Rate?
The following is the formula used for calculating the inflation rate:
Inflation Rate = (Po- P-1)* 100 / P-1,
where
Po = the present average price
P-1 = the price that existed last year.
Inflation rate is always presented in the percentage.
Summary
In this article I have explained the very basic details about the inflation and how it is calculated. I hope it provides some light on your mind. When some one talking about the inflation, you will understand the meaning of it. In future articles I will be writing about the different types of inflation. It is such a big topic, cannot be covered within single blog post. Keep reading this site to get latest news on financial subject. Thank you for reading this article.
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