Former US President Ronald Reagan described inflation as being, “as violent as a mugger, as frightening as an armed robber, and as deadly as a hit man.” Karl Otto Pohl, former president of the German Bundesbank, said: “Inflation is like toothpaste; once it’s out of the tube, you can hardly get it back in again.”
Conway, E. (2009). Inflation. In 50 Economic Ideas You Really Need to Know (p. 79). Quercus.
To calculate the rate of inflation we use the simple formula: % Change = Change / Original
OR – Inflation = (Prices in Year 2 – Prices in Year 1) / Prices in Year 1
Here is a wonderful little video that explains exactly how this calculation is made:
https://www.youtube.com/watch?v=aa_-oVueQjc
Sample Solution
