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    The document differentiates between three measures of inflation rate: 1) The Consumer Price Index (CPI) measures monthly price changes paid by consumers using a weighted average. It provides an example calculation showing a 25.9% inflation rate. 2) The Product Price Index (PPI) measures the average price change domestic producers receive, calculated at the wholesale level. It provides an example showing prices rising from 100 to 125.7 over 10 years. 3) The GDP Deflator measures price changes for all goods/services in an economy, representing total output. It provides an example calculation of the deflator remaining at 100.

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    The document differentiates between three measures of inflation rate: 1) The Consumer Price Index (CPI) measures monthly price changes paid by consumers using a weighted average. It provides an example calculation showing a 25.9% inflation rate. 2) The Product Price Index (PPI) measures the average price change domestic producers receive, calculated at the wholesale level. It provides an example showing prices rising from 100 to 125.7 over 10 years. 3) The GDP Deflator measures price changes for all goods/services in an economy, representing total output. It provides an example calculation of the deflator remaining at 100.

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    The document differentiates between three measures of inflation rate: 1) The Consumer Price Index (CPI) measures monthly price changes paid by consumers using a weighted average. It provides an example calculation showing a 25.9% inflation rate. 2) The Product Price Index (PPI) measures the average price change domestic producers receive, calculated at the wholesale level. It provides an example showing prices rising from 100 to 125.7 over 10 years. 3) The GDP Deflator measures price changes for all goods/services in an economy, representing total output. It provides an example calculation of the deflator remaining at 100.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    17 views3 pages

    2

    Uploaded by

    Twoprincess Inone
    The document differentiates between three measures of inflation rate: 1) The Consumer Price Index (CPI) measures monthly price changes paid by consumers using a weighted average. It provides an example calculation showing a 25.9% inflation rate. 2) The Product Price Index (PPI) measures the average price change domestic producers receive, calculated at the wholesale level. It provides an example showing prices rising from 100 to 125.7 over 10 years. 3) The GDP Deflator measures price changes for all goods/services in an economy, representing total output. It provides an example calculation of the deflator remaining at 100.

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    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    of 3

    Tugaoen, Jasmin Bhelle D.

    L
    Assignment in Economic Development

    Differentiate the three measures of inflation rate and provide sample computation for
    each
    a. Consumer Price Index (CPI) - this measures the monthly change in
    prices paid by the consumers. This calculates the weighted average of
    the goods and services and it is considered as the most popular and
    used method of computing inflation.

    Annual CPI = Value of Current Year / Value of Prior Year x 100

    Divide the current product price total by the past price total which is
    8.50 / 6.75 = 1.26 and multiply it by the multiple of 100 so 1.26 x 100 =
    125.9 then subtract to 100 to get the final percentage of 25.9%.
    b. Product Price Index (PPI) - this measures the average change over
    time in the price the domestic producers receive for the output they are
    producing. This type of measure is calculated based on the wholesale
    level by the industry and product category.

    PPI = Current Price of Basket / Base Price of Basket


    PPI in 2020 (Current)
    = (15 x 8+40 x 20+20 x 20) / (15 x 10+40 x 15+20 x 15) x 100
    = 125.70
    PPI in 2010 (Past)
    = (15 x 10+40 x 15+20 x 15) / (15 x 10+40 x 15+20 x 15) x 100
    = 100
    This shows that the price has risen from 100 to 125.7 for the past 10
    years.
    c. GDP Deflator - this gross domestic product deflator measures the
    changes in prices for all the goods and services produced in an
    economy. This represents the total output of goods and services.

    GDP Deflator = Nominal GDP / Real GDP x 100

    The deflator for 2010 is calculated by dividing 7,500 by 7,500 and


    multiplying 100 for a total 100. The same procedure will carry on to the
    next few years.

    REFERENCES
    Fernando, Jason, 2023 “Consumer Price Index (CPI) Explained: What It is and Hot
    It’s Used” https://www.investopedia.com/terms/c/consumerpriceindex.asp

    Indeed Editorial Team, 2023 “How to Calculate CPI (Consumer Price Index)
    https://www.indeed.com/career-advice/career-development/how-to-calculate-
    cpi#:~:text=Example%20of%20calculating%20CPI%20formula&text=When%20you
    %20divide%20the%20current,change%2C%20which%20is%2025.9%25.

    Majaski, Christina, 2023 “Product Price Index (PPI): What It Is and How It’s
    Calculated https://www.investopedia.com/terms/p/ppi.asp

    Vaidya, Dheeraj, 2023 “Producer Price Index”


    https://www.wallstreetmojo.com/producer-price-index/

    Rasure, Erika, 2022 “What Is the GDP Price Deflator and Its Formula?”
    https://www.investopedia.com/terms/g/gdppricedeflator.asp

    Vaidya, Dheeraj, 2023 “What is GDP Deflator?” https://www.wallstreetmojo.com/gdp-


    deflator/#:~:text=1.,price%20fluctuations%20in%20the%20market.

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