The formula to calculate the rate of inflation is as follows:-
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Rate of Inflation = Percentage change in price from base year to current year = (CPI current year- CPI base year) x 100 CPI base year [ CPI = Consumer Price Index ]
Illustration: Given: Base year -2000 ; CPI based year -100 Current year -2008 ; CPI Current year = 110
To compute the rate of inflation = (CPI current year- CPI base year) x 100 CPI base year = 110-100 x 100 100 =10%
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