Legal Definitions - inflation rate

Definition: Inflation rate refers to the rate at which the prices of goods and services increase over a specific period of time. It is measured using indexes such as the Consumer Price Index (CPI) and the Producer Price Index (PPI).

Example: Let's say the price of a loaf of bread was $2 last year, but this year it costs $2.20. This means that the inflation rate for bread is 10% ($0.20 increase divided by the original price of $2).

Explanation: The example illustrates how inflation rate is calculated by comparing the price of a good or service over time. In this case, the price of bread increased by 10% over the course of a year. This increase in price can be caused by various factors such as supply and demand, changes in production costs, or changes in government policies.