Method to Calculate the Rate of Inflation

The indication of the rate of inflation can be done through the calculation of the consumer price index(CPI), which is also named as the cost of living index. (Vengedasalam and Madhavan, 2011).To calculate the inflation rate, compute the change in percentage in the CPI from one year to the next. (Vengedasalam and Madhavan, 2011).

Inflation rate=[(CPI this year-CPI last year)/ CPI last year] X 100%