How to calculate inflation rate?

Question

Inflation affects creditors and debtors. Suppose the Canadian debtors borrowed $100 from the Canadian creditors on December 31, 1992 and promised to pay back $105 on December 31, 1993. This is equivalent to paying back a nominal interest rate of 5%.

I know that nominale interest rate is 5 % but what is the inflation rate and how do u caculate it.

Also do the creditors gain or lose from this transcation?

Answer 1

In economics, the inflation rate is a measure of inflation, the rate of increase of a price index. It is the percentage rate of change in price level over time.The rate of decrease in the purchasing power of money is approximately equal.

Answer 2

Inflation rate refers to the rise in general price level of the country ( with respect to CPI or WPI) so any other data cannot be used to calculate inflation. You can calculate inflation by getting data on CPI or WPI (time series) and then calculate inflation by the following formula ((B - A)/A)*100 where A represents CPI of period 1 and B represents CPI of period 2.

All the best

Answer 3

You cannot calculate the inflation rate without knowing both nominal and real rate. If the figure is a true story,just check an inflation report for Canada between 1992-93.

Answer 4

very confusing point. look from the search engines. it could help!