Inflation Rate Definition

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“Inflation rate” is a term used in economics which refers to the rise in prices of goods or services over a given time period; as prices rise, the value of the goods or service diminishes.

Types of Inflation

There are three main types of inflation: • Monetary Inflation refers to the “expansion of the money supply” such as when governments prints money excessively without it being backed by funds. • Price Inflation refers to the balancing of monetary inflation. It devalues the dollar by reducing purchasing power, which results in reduced demand and increased supply. • Real Inflation refers to the “rate at which inflationary causes would impact price levels if all inflationary causes were considered” without regard to time lapse.

Cause of Inflation

Simply put, inflation is caused when too much money enters the market place. Since the money is devalued the price of goods must increase in order to compensate.

Current Inflation Rate

The Current Inflation Rate can be found in a chart put out by the publishers of the Financial Trend Forecaster. This is put out monthly, and is calculated to two decimal points whereas the government only calculates inflation to one decimal point.

Consumer Price Index

The Consumer Price Index measures the differences in prices over time. It is compiled by the Labor of Bureau Statistics on a monthly basis and be found on their website.

Calculation

The Bureau of Labor Statistics has an online inflation calculator which can compare the value of money between any two years starting from 1913 to today.

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