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8 May, 2015 - 11:16

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

The rule of 70 is used to determine how long it will take for prices to double at the current rate of inflation. The number of year for prices to double is determined by dividing 70 by the annual rate of inflation. (The rule of 70 can also be used to determine how long it will take for savings or GNP to double).