Give detail explanation about the Inflation
- Price index is computed at a particular point in time, inflation over a time period, mainly one year
- Inflation may just as well be defined as percentage change in price level.
- Inflation is independent of which year we use as our base year for our price index.
- You very often hear that inflation is "percentage change in prices" though keep in mind that "prices" is then short for the price level.
- Since the price level may be defined in many different ways (using different goods and different weights in basket), inflation may be defined in many different ways.
- if price index decreases between two points in time we say that inflation is negative or that we have deflation.