How is inflation measured?

Inflation is measured using various statistical indicators that reflect changes in the average prices of goods and services in an economy over a specific time period. One common method is the consumer price index (CPI), which tracks the price changes of a basket of goods and services typically purchased by households. The CPI is calculated by comparing the current prices to a base period and then assigning a weighted average to different categories of goods. Another method is the producer price index (PPI), which measures the average change in prices received by domestic producers for their output. Central banks and governments also monitor inflation through other indicators such as the wholesale price index (WPI) and core inflation, which excludes volatile items like food and energy. By carefully tracking these measurements, policymakers can gauge the overall rate of inflation and make informed decisions regarding monetary and fiscal policies.

This mind map was published on 17 September 2023 and has been viewed 93 times.