Inflation rate denotes the rise in cost of goods or services over a given time period. As cost increase, the value of service weakens.
A person earned 5000 from the year of 1985 to 2005. Find the purchasing power and inflation rate?
Earnings= 5000 Rs, Start Year= 1985, End Year= 2005.
Purchasing Power & Inflation Rate.
Let us calculate the value of Purchasing power and inflation rate
Purchasing Power = Earnings * (cpi (this year) / cpi (last year)) Purchasing Power = 5000 * (195.3 / 107.6) = 9075.28 Rs.
Inflation rate= cpi (this year) - cpi (last year) / cpi (last year) * 100 Inflation rate = (195.3 - 107.6) / 107.6 * 100 = 0.8151 * 100 = 81.51%