Inflation is commonly measured with the consumer price index. The consumer price index reports the general level of prices of a basket of 300 consumer goods and services. It is stated as a ratio of prices in a given year divided by the prices of the same basket of goods and services in a base year. The base year index is set at 100. The rate of inflation is calculated for any given year with the formula: (current year index - previous year index)/previous year index
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