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ModuleThe Measurementand Calculation of Inflation
KRUGMAN'SMACROECONOMICS for AP*
15
Margaret Ray and David Anderson
What you will learnWhat you will learn
in thisin this ModuleModule::
• How the inflation rate is measured
• What a price index is and how it is calculated
• The importance of the consumer price index and other price indexes
• Aggregate Price Level
Price Indexes and the Aggregate Price Indexes and the Aggregate Price LevelPrice Level
Market Baskets and Price Market Baskets and Price IndexesIndexes
•Price Index
Price Index in given year =Cost of market basket in a given year
Cost of market basket in base year X 100
Inflation Rate =Price index in year 2 - Price index in year 1
Price index in year 1 X 100