The Inflation Rate

• More than one…. (P(t)-P(t-1))/P(t-1)

• GDP deflator and CPI

• GDP deflator = Nominal GDP / GDP

  • P0 = 1
  • P1 = 230,000/210,000 = 1.1 (approx.)

• NGDP growth = GDPg + Inflation (defl)

• 15 5 10

• Why do we care?