What's the equation for inflation measurement?

If P0 is the current average price level and P − 1 is the price level a year ago, the rate of inflation during the year might be measured as follows:

inflation rate = {P0 - P{-1}divided by P-1 times 100%

After the year the purchasing power of a unit of money is multiplied by a factor 1 / ( 1 + inflation rate ).

It's the amount by which the growth in the money supply exists underlying economic growth (usually GDP). So if real economic growth is 2% and the money supply grows 3%, you have 1% inflation. The lay media has taken to substituting the CPI as a measure of inflation because it seems easier to understand, but it's not the same thing. Other factors than the money supply (such as the velocity of money) influence CPI.

I don' know the exact equation--probably your alter ego is right. But I can give you a couple of valid definitions, which might help you alot:

1)The amount of money in the Country exceeds the amount of things there is to buy. On the other hand, when the amount of products in the country exceeds the amount of money there is to buy things, that's deflation. Both upset the economic field.

2) the fact is that you can't take more out of something than is in it. An activity, by its own efforts, has to make money before it can spend it. Covernements today are omitting doing that so you have a cheapening of money called inflation. (LRH)

Hope it helps. Ciao...John-John.-