Thursday, January 7, 2010

Two-Minute Drill -- Inflation rate

Summary: Find the inflation rate.

The inflation rate is .0196. I derived this answer by taking (104-102)/102. The price level measures the value of a fixed market basket of goods. Therefore, the change in the CPI from period to period is the inflation rate.

The St. Louis Federal Reserve Bank has the monthly Consumer Price Index for download in a graph or data. Use FRED data series:
CPIULFNS, Consumer Price Index for All Urban Consumers: All Items Less Food.

Extra Credit: Why does the mainstream media report the CPI less food and energy?

About the Author: Mike Fladlien is an AP Economics teacher from Muscatine High School in Muscatine, IA.


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